After Rupee, Dubai attracts India's commodity traders

Mumbai: Dubai has become a major off-shore center rivaling Singapore for those who want to bet on India’s market. After attracting major participation in Indian currency, Dubai market is also gaining strong ground in trading of India linked commodity futures.

Although the volumes are small, experts say this is the beginning and they may go the same way like rupee futures. After a few years of trading in India's rupee futures, the open interest in rupee contracts on Dubai exchange comes close to rival that of Indian exchanges. The Dubai Gold and Commodity Exchange even launched the Rupee Options recently.


(Chart source: DGCX)

In February, the Dubai India Crude Oil futures registered significant monthly volume of 5,980 contracts on DGCX. The Indian Rupee Options contract recorded a 92% growth year on year during the month with around 50,000 lots being traded. The exchange said that it had also recorded the highest monthly average open interest (OI) of 23,275 in the contracts, signifying increased interest and liquidity.

This apart,the DGCX also also introduced trading in India linked commodity futures including bullion and energy basket, the price of which is based on Indian contracts. Even these contracts are gaining swift ground and are likely corner a larger market share away from Indian exchanges.

Ease of doing business in Dubai due to lax tax and banking laws are the chief reason for shifting of India’s volume there. A host of large Indian traders in equities and commodities have set up their operations in Dubai.

To stem the flow of volumes to off-shore destinations, India’s oldest stock exchange the BSE this year launched its operations in Gujarat based Gift City, a perceived tax haven. But the slow pace of regulatory action in allowing exchanges to launch products in Gift city are major hurdle in attracting volumes for India’s market, said experts.

“Indian Union Budget proposals and the ongoing state assembly elections have stirred volatility in Indian markets. Since many of our products are geared towards offshore investors, we often see spikes of trading activity in our Indian referenced contracts, which highlights the importance of these products for hedging purposes in a period when financial markets are experiencing sharp volatility,” said Gaurang Desai, CEO, DGCX.

DGCX plans to list more Single Stock Futures as well as energy products in the second quarter of 2017 to attract more investor participation, the exchange said. Singapore has been famous for trading Nifty, one of India's key benchmark derivative index.