Here’s how SEBI’s historic decisions gave commodity derivatives market a boost

Market regulator Securities and Exchange Board of India’s (SEBI) push in the commodity derivatives market is proving to be a boon for the sector.


SEBI’s historic decisions made 2018 a year for commodities and also paved path for a prosperous 2019. A slew of decisions improved futures and the spot markets that saw great participation.



It allowed options on many metals, energy and agri contracts and asked the exchanges to put in a mechanism to ensure no participation is at the disadvantageous side. SEBI asked commodity exchanges to align trading lot size with delivery lot size to weed out the barriers in physical delivery of the commodity. This was done at par with the international standards.



Meanwhile, SEBI also increased the trading time by an hour to boost participation. Now, you can invest in non-agri commodities from 9am to 11.55 pm, and for agricultural and agri-processed commodities, the trading hours are from 9 am to 9 pm.



It also permitted foreign entities to participate in the commodity derivative segment of recognized stock exchanges for hedging their exposure. Such foreign entities shall be known as eligible foreign entities (EFEs).



Furthermore, SEBI allowed custodial services in the commodity derivatives market that would promote participation of mutual funds and other institutional investors.



Moreover, MCX decided to modify optional delivery of zinc and aluminium to compulsory deliverable instead of both options-cash and delivery.



These decisions by SEBI and MCX will definitely give a boost to the commodities and investing in the market can prove to be a good decision. The much-needed transformation in the commodity derivatives market can enhance asset allocation and better investment avenues.



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