Options trading to have one agri & non-agri item each: Sebi


On the heels of allowing options trading in commodities, market watchdog Sebi said the process will begin with one agri and one non-agri product. “We will begin options trading in one agri and one non-agri product. Options could be helpful to the farmers and producers in their price protection and hedging needs,” chairman U K Sinha told reporters here on the first anniversary of commodities regulation under the Sebi. The regulator, however, did not offer a timeline for the introduction of these items. Exchanges will have to design the product for option keeping in mind various parameters, including risk parameters and then send it for Sebi approval, Sinha added. On September 28, Sebi had extended options trading in six new products in its push to deepen the commodity derivatives market. So far, only future contracts are permitted in the commodity derivatives trading space. The regulator had added six new products — diamond, tea, eggs, cocoa, pig iron and brass — into option trading list, taking the total number of permitted commodities on the notified list to 91. Exchanges, investors and other market participants have been demanding options trading as also new products for a long time and they welcomed the move taken by the government and Sebi, which now regulates the commodities market as well. Sinha said a well-run commodity derivatives market will bring in price security to farmers. To ensure security of investments, he said, Sebi will take a number of measures so that more and more hedging can take place including for those non-agri items as whenever india, facing shortfalls, had to go to the global markets, prices used to get destabilised. “So how to hedge requirements of the nation, in a manner that do not create undue price destabilisation, is our objective,” he said. He also said that “due to better risk management guidelines and warehousing guidelines we now have reasonable confidence levels to handle the market”. The turnover of commodity exchanges stood at Rs 67 trillion in 2015-16, up 9 percent from the preceding fiscal.