BSE, NSE commodity derivatives foray on Oct 1

The country's two leading equity bourses, the National Stock Exchange (NSE) and BSE, said they would allow trading in commodity derivatives from next month.

Both have received the needed approval from the Securities and Exchange Board of India (Sebi), beside an okay from their respective clearing corporations.

“We have applied for Sebi approval to launch gold and silver contracts. We are planning to launch on October 1. This will be the first phase of commodity launch. In the second phase, we will be launching energy contracts, including in crude oil,” said Ashishkumar Chauhan, managing director at BSE.

An NSE official said, “We will certainly launch gold futures from October 1. We might launch other contracts as well.”

Both equity exchanges would be trying to take market share from the existing commodity exchanges, such as Multi Commodity Exchange ( MCX) and National Commodity & Derivatives Exchange. The latter incumbents will try to protect their turf.

“The system of single screen with all the three trading classes – equity, commodity and currency – already exists. Liquidity would be a prime driver for trading volume. For brokers, exchange-wise collateral will not be required if clients want to trade in all asset classes on one platform. Product innovation would be the key for success of BSE and NSE,” said Kishore Narne, associate director

at Motilal Oswal Financial Services.

Trade sources say MCX currently clocks a daily turnover of around ~80 billion from gold contracts.

In a recent interaction with this publication, Mrugank Paranjape, managing director of MCX, had said they had no plan for now to enter the

equity segment. Also, that there was no fear of migration of volume from MCX to any other exchange.

BSE started mock trading in commodities in January. It has signed deals with traders and users of agricultural commodities for future launches, including one with the Cotton Association of India.