Legal hurdle forces Sebi to defer decision on allowing commexes to launch options


A legal hurdle has compelled Sebi to defer a decision allowing commodity exchanges like MCX and NCDEX to launch the much-awaited options instrument. The Sebi board will have to discuss the ” legal” ssue with the department of economic affairs, a Sebi official told ET without elaborating .

He added though that the matter would be taken up on a “priority” footing and “expedited ” as soon as possible.

The regulator was to issue operational framework for the launch of options by the exchanges shortly after its board meet on Saturday.

“The framework is ready, only the legal issue (of having such an instrument ) under the Securities Contracts (Regulation) Act, needs to be looked at in greater depth.”

Sebi was in advanced stages of approving an option that would have a futures contract as an underlier and be converted into a futures contract prior to delivery. Sebi will initially allow launch of one agri and one non-agri option by the two exchanges.

The commodity derivatives market began in late 2002 when Ahmedabad-based plantations bourse NMCE came on stream. This was followed by metals and energy major MCX and agri bourse NCDEX in the subsequent year. Only futures contracts on gold, silver, crude , copper, edible oilseeds and oils, spices, wheat and sugar, etc are traded.

Futures contract facilitates the purchase or sale of an underlying commodity for a preset price on a future date. An options contract is of two types — call and put. Call option facilitates purchase of a commodity at a preset price in future while put option refers to sale of the commodity . Both are purchased from options writers or sellers for a premium.