Commodity options’ final framework likely by mid-January

MUMBAI: Market regulator, the Securities and Exchange Board of India (Sebi), is gearing up to finalise the framework for the introduction of options to the 13-year-old commodity derivatives market after receiving suggestions from commodity exchanges like MCX and NCDEX.

Sebi has set itself a deadline of mid-January next year, before the Union Budget for FY18 on February 1, to put the framework in place, said Sebi sources.

Once the framework is finalised, exchanges can launch new products by April of the next financial year (FY18), sources said. “The task requires careful consideration, as the intended beneficiaries are farmers,” said one of them.


The sources confirmed that though the exchanges were of the opinion that the contracts should be cash settled, as in the equity segment, the regulator was concerned that the instrument should not become “another tool” in the hand of speculators.

“We will take a call soon not just on which commodities from the agri and non-agri space to permit options to be launched on, but also whether allowing them to be cash settled might result in traders from the futures segment moving to options, and making the existing futures contracts illiquid,” said another source.

Currently, MCX and NCDEX can offer only futures contracts, most of which, at least in the agri space, end in delivery. While farmers don’t trade on futures, they can know the best price their produce can sell for through tickers set up by futures market in mandis across the country and through bhav copies in newspapers and on mobiles.