Sebi allows exchanges to launch multiple contracts in same commodity

Jan 12, 2023

Synopsis
The move came after the stock exchanges expressed their concerns before Sebi that due to the requirement of a single contract on a particular commodity, except for gold, silver and precious metals, the participation of investors, especially in metal contracts, is limited.

Capital markets regulator Sebi on Thursday allowed stock exchanges to launch multiple contracts in the same commodity in a bid to encourage broader participation of investors in commodity derivatives market. This would come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said in a circular.

The move came after the stock exchanges expressed their concerns before Sebi that due to the requirement of a single contract on a particular commodity, except for gold, silver and precious metals, the participation of investors, especially in metal contracts, is limited.

Also, the stock exchanges have suggested Sebi to launch multiple contracts on same commodity to cater to all value chain participants.

"Accordingly, after due consultations, it has been decided that stock exchanges may be allowed to launch multiple contracts in same commodity," the markets regulator said.

A derivative contract, which has a commodity as its underlying is known as a 'commodity derivatives' contract. Generally, the commodities traded in commodity derivatives market are classified into two broad categories -- agricultural commodities and non-agricultural commodities.

In December, the regulator had extended the suspension of futures and options trading in seven agricultural commodities for one more year till December 2023 in a bid to rein in prices.

Seven agricultural commodities suspended by Sebi are wheat, moong, paddy (non-basmati), chana, crude palm oil, mustard seeds and their derivatives and soya bean and its derivatives.

[The Economic Times]