Sebi to finalise options in commodities today

Net worth norms for warehouse service providers also likely to be tightened

The Securities and Exchange Board of India is meeting the Commodity Derivatives Advisory Committee tomorrow to give a final shape to option trading in commodity futures and revise warehousing norms to ensure good delivery on settlement. 

According to sources, three commodities in each segments that is agri and non-agri have been proposed for introducing options. Sources said that three agri commodities from soya and guar segments are preferred for options while from non-agri gold, silver and crude oil are likely to be finalised as these commodities have better liquidity and NCDEX and MCX will respective be able to introduce options. 

 

While in equity segments, options are cash settled and globally, especially in C-Bot, also even agri options are cash settled but after tomorrow's meeting India options may be settled in delivery to help better price discovery and make option trading a risk management tool for farmers and small and medium enterprises in real sense.  

Many brokers, especially equity brokers, are favouring cash settled commodity options as they are easy to settle but Sebi is likely to follow view of delivery settled options to align them with practice in agri-commodities and in gold and silver where futures segments also have option to give delivery.

However to ensure good delivery, which was Sebi’s top priority, while reforming commodity derivative regulations, new n etworth criteria for warehouses are also being discussed at tomorrow’s meeting, according to sources and net worth criteria will be further tightened. However, the issue about warehouse service providers who are working only on leased warehouses will be discussed and the way to fix net worth criteria for them may become a debatable issue.

Sources said that Sebi had floated discussion paper on warehouses and based on comments received, minimum Rs 50 crore may be fixed as net worth for warehouse service providers and preference may be for owned warehouses rather than leased warehouses. This could create debate because several large warehouse service providers have most facilities on lease. There is a proposal coming up for discussion that every delivery cenre shall have atleast one exchange recognised warehouse and if same warehouse service provider’s warehouses are recognised by more than one commodity exchange, than net worth criteria can be increased. For example if two exchanges recognise same service provider, net worth should be Rs 50 crore.