National markets watchdog Securities Exchange Board of India (Sebi) has allowed recognised stock exchanges armed with a commodity derivative segment to introduce options on their commodity indices.
"The recognised stock exchanges with a commodity derivative segment, willing to introduce trading in options on commodity indices shall take prior approval of Sebi for the same," a circular said.
The capital market regulator said the stock exchanges will have to submit at least past three years' data of the index constructed along with data on monthly volatility, rollover yield for the month and monthly return while seeking the approval. On getting the green light, the stock exchanges will also publish these data on their websites before the launch of the contract.
"Stock exchanges shall make necessary disclosures such as open interest of top 10 largest participants/group of participants in 'option in indices' (both long and short) and the details of their combined open interest in underlying constituents, in line with Sebi guidelines," the Sebi notice said.
The regulator further stated that each option expiry will have a minimum three strikes - one each for in the money (ITM), out of the money (OTM) and at the money (ATM). Also, the size of the contract should be at least Rs 5 lakh at the time of introduction in the market. To begin with, the maximum tenor of contracts shall be 12 months.
The trading hours of the options will be similar to trading hours of the constituent futures of underlying index and the expiry data can be set by the exchanges, the Sebi circular said.
At 10am, MCX shares were trading at Rs 1,473 on the BSE, up 4 percent from its previous close.
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