Leg-Up For Commexes

The SEBI's moves to introduce options and rope in institutional investors may bring vibrancy back into commodity derivatives markets.

- Laxmi Devi

The past few years have been quite cheerless for the commodity derivatives markets. However, launch of options trading and regulator Securities and Exchange Board of India's (SEBI) likely decision to permit institutional participation may bring life back into the markets.

The three national commodity exchanges (commexes) - MCX, NCDEX and NMCE - and regional bourses are estimated to have clocked about Rs 68,00,000 crore of turnover in 2016, a little above the previous year's (2015) around Rs 66,00,000 crore. The higher turnover was quite a solace despite the hardship caused by suspension of the forwards trading segment, delisting of chana and castor futures and disruption as a result of demonetisation.

MCX has continued to retain a major market share of over 85 per cent in the commodities markets, followed by NCDEX and NMCE. Besides these three national-level bourses, a dozen regional exchanges operate in the country's commodity futures markets.

Systemic Overhaul

Last year, the SEBI was more focused on streamlining the ecosystem and putting a stronger foundation of surveillance and risk management to make the commodity futures markets safer. It also gave an in-principle nod for launch of a new product, options.

The SEBI has been regulating the commodity derivatives markets for a little over a year now. As a first step, the regulator has been taking measures to make the markets safer. The SEBI has moved to the next level with an aim to increase the depth of the markets and improve participation in them.