MCX seeks Sebi nod for schemes to boost gold options volume

The Multi Commodity Exchange (MCX) has sought approval from the Securities and Exchange Board of India (Sebi) for introducing liquidity enhancement schemes for its recently launched gold options contracts.

“MCX is facing some issues with gold options contracts. It has sought permission to launch liquidity enhancement schemes to boost volumes. We are considering it,” said Sebi Chairman Ajay Tyagi on Tuesday on the sidelines of an event organised by the Association of Investment Bankers of India.

Launched in October, MCX’s gold options contracts have not taken off. Their daily average turnover declined to ~130 crore in November from ~297 crore in October. The daily average turnover of gold futures contracts on the exchange was ~2,054 crore and ~2,297 in October and November, respectively.

By volume, the ratio of gold options contracts to gold futures contracts slipped to less than 3.5 per cent in December from over 14 per cent in October. Before the launch of the gold options contract, market participants were anticipating volumes in this segment would climb to at least two times those of gold futures contracts.

An email to MCX Managing Director Mrugank Paranjape and the exchange’s spokesperson did not elicit any response. Sebi and MCX had earlier said innovations like options in commodity trading would lead to a substantial increase in market volume. "Options in equities took almost 10 years to become successful. Gold options will also take time to become successful," an MCX executive had said earlier.

Sebi has specified guidelines for certain volumes in existing gold options contracts before allowing contracts of smaller denominations. Sources said MCX was likely to engage jewellers and organise awareness programmes to increase volumes in gold options contracts.