Handle with care

Commodities options trading needs tight monitoring

By formally approving the introduction of options trading in commodities, the Securities and Exchange Board of India (Sebi), the common regulator for both the capital and commodities markets, has fulfilled a long-pending need for a cost-effective risk management tool for farmers and commodities-based small businesses. The move will also deepen the commodities market, improve liquidity and consolidate the price discovery process. Options trading, if competently regulated, can be a game changer for farmers for whom futures trading was relaunched by the Atal Bihari Vajpayee government in 2002 after a hiatus of nearly four decades. The idea was to let risk-averse