Commodity exchanges today welcomed the Sebi's decision to allow options trading in commodity derivatives, saying it will complement the existing futures contracts and bolster price discovery process in the domestic market.
The board of markets regulator Sebi approved a proposal to allow options trading in the commodity derivatives in at its meeting here.
"Commodity options were one of the most eagerly awaited financial instruments in the commodity derivatives markets. Options definitely would complement the existing futures contracts and further bolster price discovery process in the domestic commodity market," MCX Managing Director and CEO Mrugank Paranjape said here.
Options would attract the domestic hedgers. MCX welcomes the development and awaits detailed guidelines for trading, Paranjape said, adding his exchange is committed to work towards market development.
Unified license to stock brokers in equity and commodity derivatives markets would bring out many synergies and would benefit the market at large. It enhances economic efficiency in meeting operational and compliance obligations at the member level, potentially resulting in ease of doing business, he said.
The integration would also help in widening market penetration through greater financial inclusion for stakeholders across all market segments, Paranjape said.
National Commodity & Derivatives Exchange Ltd (NCDEX) said the Sebi decision is a hugely positive development. Options are a much better risk management for a large number of participants including farmers, who have started using futures actively as well.
The combination of options & futures can give market participants the leverage of futures with the safety of options. With addition of liquidity through options, various associated benefits such as lowering of impact cost, improved market stability, improved price discovery etc. Will also be seen, it said.
In a related development, SEBI has taken a major step in the integration of commodity and equity markets.
Unified licensing for brokers will be hugely helpful for both investors and market participants. It will not only increase ease of doing business and allow investors to utilise their funds in a more efficient manner, but also result in a big reduction in establishment cost for brokers, NCDEX said.
Disclaimer: No Business Standard Journalist was involved in creation of this content
