SEBI Approved Options Trading in Commodity Futures (Download PDF)

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SEBI has given green signal to options trading on futures contract of commodities but the capital market regulator has initially permitted on futures of one commodity. For the commodity exchanges SEBI has given strict eligibility criteria for starting the trading in options contract of commodities.

Key facts

  • Trading for futures contract will only allowed for top five commodities based on total trading turnover value of previous 12 months.
  • Daily turnover average of underlying futures contract this commodity must be less then Rs200 crore for agricultural and agri-processed commodities, and Rs1, 000 crore for other commodities in the previous 12 months.
  • The commodity exchanges will also follow robust risk management measures as suggested by SEBI.
  • product design guidelines will also given for trading in options on commodity futures.
  • The commodity derivatives exchanges is made compulsory by SEBI for those who wants approval to commence trading in options contracts.
  • Commodity Exchanges have been asked for a long time to permit options trading in commodities be allowed to the SEBI and SEBI had agreed to permit options trading last year but some legal desires were discontented.

What is Options Contract

  • Option Contract means “derivative product that offers an investor the right to purchase without any obligation to buy at the specified price/date. “

What is Futures Contract

  • Futures Contract means “contract between two parties where both parties agree to purchase or sell a particular commodity or any other financial instrument at a predetermined price at a specified time in the future. ”

SEBI

  • Securities and Exchange Board of India (SEBI) was founded in 1988 and got statutory mandate and powers under the SEBI Act, 1992.
  • Its main aim is to protect the interests of investors in securities and also to promote the development and regulation of securities market.

- Published/Last Modified on: June 21, 2017

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