MCX, the country’s largest commodity exchange, has moved SEBI to allow options trading in commodity indices following good traction for futures on commodity indices (Comdex) which completed one year of trading.
The exchange has moved the proposal to market regulator SEBI, which will take it up at its board meeting and announce a detailed framework, said sources.
Following this, exchanges have to develop the product and file a separate application with SEBI for approval, they said.
Advantages
Compared to futures, the quantum of investment needed for trading in options is lower as investors need to pay only the premium on their trading positions. This also leads to lower margin requirements.
Moreover, options contract will be cash-settled and investors need not worry about it devolving on futures segment or taking physical delivery of commodities.
The futures trading in Bulldex started last August while that of Metldex was launched in October 2020.
The open interest in futures on commodity indices in MCX has been increasing steadily, particularly after SEBI imposed peak margin.
The open interest on Bulldex had increased to 2,271 lots last month against 1,103 lots in April. However, the average daily turnover has fallen to ₹159 crore from ₹175 crore in the same period as bullion prices have remained less volatile.
Similarly, open interest in Meltdex increased to 920 lots last month from 541 lots in April while average daily turnover was up at ₹163 crore from ₹85 crore in the same period.
In general, the turnover on commodity exchanges has remained almost stagnant due to higher trading cost and fewer product launches.