BSE kicks off futures trading in gold and silver contracts

Exchange not to levy any transaction cost for a year

The BSE started offering futures trading in gold and silver contracts on Monday, to mark its entry into commodity derivatives. This made it the country’s first ‘universal’ stock exchange comprising equity, mutual funds, currency and commodities.

The Securities and Exchange Board of India (Sebi) approved the concept of a universal exchange over a year ago. This means futures contracts in commodities would be allowed to be launched on equity exchanges and vice versa.

BSE’s major rival, the National Stock Exchange (NSE), will get into commodity futures, also with gold and silver contracts, on October 12.

Nearly 150 members participated in commodity futures on the launch day. The exchange has 1,400 registered members and 450 had expressed interest in commodity trading. The first bid was ~30,700 per 10g; the first ask-offer was for ~30,800 per 10g.

“We have announced zero transaction cost in gold and silver for one year, starting today. Let traders experience our trading and delivery system. Later on, we will decide the transaction cost depending upon the market condition and other factors, including trading volume,” said Ashishkumar Chauhan, managing director of the bourse.

He did not expect any legal objection to the year’s offer. BSE started with 1 kg gold and 30 kg of silver contracts for delivery in December onward. The exchange has already applied for approval with Sebi in crude oil and copper contracts. Later, the plan is to expand into base metals— aluminium, zinc, lead, nickel. For this, it hasthe Bombay Metal Exchange. For the gold and silver contracts, it has similarly tied up with the India Bullion and Jewellers Association (it hopes to deliver to all jewellers and dealers in the country).

In the third phase, BSE wishes to launch in agricultural commodities — cotton, guar gum, sugar, edible oil, oilseeds. The plan is to launch 60-70 commodities on its platform over the next four years, of the 90 notified for trading on exchanges by the Government of India.

Futures contracts were allowed in 2002 but only a few exchanges have succeeded, and in a limited number. S K Mohanty, Sebi wholetime member, says the commodity derivatives market continues to be in a nascent stage. This is despite India being a leading player in terms of production or consumption in a number of commodities.