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In a partial relief to comexes, the commodity markets regulator the Forward Markets Commission (FMC), has decided to grant continuous approval for trading in futures contracts instead of the existing practice of giving permission yearly.
This means, exchanges with existing running contracts do not require fresh approval on their expiry after a year, subject to fulfilling the conditions as outlined by the regulator.
With this, the market leader, Multi Commodity Exchange (MCX), does not require yearly permission for liquid contracts, including bullion, energy and a host of agri commodities while the National Commodity and Derivatives Exchange (NCDEX), National Multi Commodity Exchange (NMCE) and Ace Derivatives and Commodity Exchange (Ace) do not need to seek approval for their 25, 13 and 12 contracts, respectively.
“It is a good move,” said Naveen Mathur, associate director, Angel Broking.
Approval of futures contracts trading on continuous basis is contingent upon volume and open interest at the exchange.
While exchanges can re-launch contracts with existing specifications and launch calendar, modifications proposed by the respective exchange do require regulator’s approval.
The FMC also empowers exchanges for taking a decision on “not launching” any contract with prior notice to market participants with assigning adequate reasons thereof. Relaunch after suspension for a periodic contracts should also require approval from FMC.
“The decision will enhance operation efficiency and reduce uncertainty in the minds of market participants to take their trading decisions,” said Ashok Mittal, chief executive officer of Emkay Commotrade.
The FMC has asked exchanges to submit a monthly report on trading and settlement of contracts approved for continuous trading.
