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Sebi to finalise options in commodities today

The Commodity Derivatives Advisory Committee of the Securities and Exchange Board of India ( Sebi) will meet on Friday with senior officials of the latter, to give a final shape to the rules on options trading in commodity futures, beside revising the warehousing norms to ensure good delivery on settlement.
The decision taken, after discussing with the advisory committee, will be placed before the regulator’s board, to finalise the regulations.
According to knowledgeable sources, three commodities in each segment, agricultural and non- agricultural, have been proposed for introducing options. It appears commodities from the soya and guar segments are preferred in the former. From the non- agri segment, it is likely that gold, silver and crude oil will be finalised. All these These have better liquidity and both the National Commodity and Derivatives Exchange and the Multi Commodity Exchange, respectively, will be able to introduce the options.
In the equity segments, options are settled in cash. A view is being discussed, and might find favour on Friday, that options in this country should be settled in delivery, to help better price discovery and make options trading a risk management tool for farmers and smaller enterprises in a real sense.
Many brokers, especially equity ones, are favouring cashsettled commodity options as they are easier. Sebi is likely to follow the other view, to align these with the practise in agri commodities, and in gold and silver, where the futures segments also have the option to give delivery.
A new criterion on net worth for warehouses is also to be discussed; this is likely to be tighter.
However, how to fix net worth for warehouse service providers who are working only on leased premises might become a matter of debate.
Sebi had a floated discussion paper on warehouses. Based on the reactions, a minimum of Rs.50 crore might be fixed as net worth, with preference for owned warehouses than leased ones. However, several large warehouse service providers have most of their facilities on lease.
There is a proposal that every delivery centre shall have at least one exchange- recognised warehouse and if the same service provider’s warehouses are recognised by more than one commodity exchange, the net worth criteria should be increased.
Business Standard New Delhi,22th July 2016

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