MCX gets Sebi approval for launching gold options
Multi Commodity Exchange (MCX) is said to be conducting mock trading sessions for the past month-and-a-half to prepare the market for options
Mumbai: The Multi Commodity Exchange Ltd (MCX) has received capital markets regulator Securities and Exchange Board of India’s (Sebi) approval to launch options on gold, said two people with direct knowledge of the matter.
“Sebi approval to launch options came in earlier this month. MCX has been engaged with the members for the past month and a half of mock trading sessions to prepare the market for options,” said the first person, on the condition of anonymity.
An MCX spokesperson confirmed the developments without going into details.
“The market expects MCX to launch options by September or latest by October. However, the exchange hasn’t finalised a date yet. MCX is ensuring that members and hedgers are prepared to trade in options before that. Though all the systems at the exchange level are prepared for the launch,” said the second person, who also didn’t want to be named.
Sebi allowed and issued norms for the launch of commodity options on 14 June. The regulator has allowed only one commodity option per exchange on a pilot basis.
Non-agri commodities, according to Sebi rules, need to have an average turnover of Rs1,000 crore and the commodity needs to be in the top five list in terms of daily turnover. Based of these criterion, MCX chose gold, which is the most liquid commodity on its platform.
Sebi on 26 April had cleared the issues around settlement by finalizing amendments to the Stock Exchange and Clearing Corporation (SECC) regulations and Securities Contract Regulation Act.
After the change in rules, exchanges are structuring the options with futures contracts as underlying. That means option contracts would be converted to futures on the day of expiry.
Earlier rules allowed for settlement of options only through physical delivery or via cash. That posed a logistic hurdle and was not in line with global practices.