SEBI greenlights launch of multiple contracts on same commodity

In a circular, SEBI said that exchanges have been demanding multiple contracts on a single commodity to ensure that market players across the value chain are catered to.

The Securities and Exchange Board of India (SEBI) has approved the launch of multiple contracts on the same commodity in the commodity derivatives segment. The move is expected to be a welcome news for India’s leading commodity exchange, MCX, as the circular comes into effect immediately.

The capital markets regulator, in a circular, said that exchanges have been demanding multiple contracts on a single commodity to ensure that market players across the value chain are catered to. Currently, barring gold, silver and precious metals, all other commodities have a single contract, which limits investors' and traders' participation.

“It is  SEBI’s constant endeavour to frame policies that encourage broader participation of investors in the commodity derivatives market. Stock exchanges have represented to SEBI that due to the requirement of single contract on a particular commodity, except for gold, silver and precious metals, the participation of investors, especially in metal contracts, is limited. Stock exchanges have expressed their desire to launch multiple contracts on same commodity to cater to all value chain participants,” the circular said.

The circular has been issued after due consultations with the Commodity Derivatives Advisory Committee, said SEBI.