BSE has become the first bourse to come out with a detailed plan on commodities derivatives and announced a free membership for the commodities segment
Mumbai: Premier exchange BSE, which is ready to launch commodities derivatives as and when the regulator comes out with detailed regulations, will enter the segment with non-agri products such as bullion, base metals, crude, and natural gas among others.
On 28 December, the markets watchdog Securities and Exchange Board of India (Sebi) had announced that from next October, the country would have a unified exchange regime wherein stock exchanges would be allowed to offer trading in commodities derivatives. Detailed guidelines are awaited.
BSE has become the first bourse to come out with a detailed plan on commodities derivatives since then and announced a free membership for the commodities segment. “We would initially focus on non-agri products such as bullion, silver, other base metals, and oil and natural gas futures and options. We’ve already upgraded our technology and our brokers will be able to trade in commodity futures on the same screen," BSE managing director and chief executive Ashish Kumar Chauhan has said.
The oldest Asian bourse, which was ready to enter the commodities segment way back in 2015, feels that it needs more preparations to enter the agri commodities segment. “Early 2015, we had approached the Forward Markets Commission to begin commodities derivatives, and then suddenly in September 2015 the FMC was merged with the Sebi," Chauhan said in Mumbai on Thursday evening.
Then BSE launched the International Exchange at the Gift City last January which trades in bullion derivatives since the past six months, and is clocking around $300 million volume daily, enjoying 15% of the total open interest in gold now, he said.
“So we are ready to launch trading in commodities derivatives anytime from now and are awaiting detailed guidelines from the regulator Sebi," Chauhan added. When asked about whether the exchange will charge a fee from brokers to trade in commodities derivatives, Chauhan said no, as “there is hardly any major investment that we will have make. The only investment that is needed is in putting up additional servers. There is no major marginal cost that we will be incurring."
He said the premier bourse is also not charging anything extra from it’s over 1,300 registered brokers for currency trade. But he did not say how many of them. Expressing confidence that the BSE will be able attract enough liquidity for commodities trading, Chauhan said BSE can leverage its technology to succeed in this segment as it did with currencies since 2013.
“For over 120 years we were leaders in equities in the country. But then in 1994 the NSE came in and the liquidity moved to them. Similarly, when we entered currencies, we were nowhere for long but today, we are the leaders. So, who knows where the liquidity will move when we enter commodities derivatives," Chauhan averred.
He based his optimism to the superior trading technology that BSE has acquired from the Deutsche Borse group which enabled it to become the largest and the fastest exchange offering currency and interest rate futures derivatives apart from the success with currencies.
The Sebi’s universal exchanges move will intensify competition among the equity bourses BSE and the NSE, and commodities players like Multi-Commodity Exchange, and National Commodity & Derivatives Exchange. The larger rival NSE is also reportedly keen to enter the commodities space.
Earlier last month, NSE managing director Vikram Limaye had said the exchange was ready to launch commodity derivatives once Sebi issued the guidelines. “If and when Sebi comes out with regulations NSE would certainly be ready to get into commodities," he had said.