MCX Gets SEBI Approval For Launching Gold Options

by Vinaya HS on September 25, 2017

in Finance

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MCX, the country’s largest commodity exchange launches options trading in gold. MCX has introduced the gold trading options after it has got a nod from the capital and commodity market regulator, SEBI. The Managing Director of MCX, Murgank Paranjape, has confirmed the approval.

The news says that the Sebi approval to launch options had come earlier the month of August. In fact, the MCX has been involved with the members since a month and a half for mock trading sessions to prepare the market for options. An MCX spokesperson has confirmed the developments without adding too much on the details.

With the introduction of the gold option trading, now the investors and hedgers will be aided with a tool to allow them to minimize their price risk at a fraction of cost as compared to currently available futures trading.

As per the Murgank Paranjape, the exchange is yet to give a firm date regarding the launch of gold options because the mock trading is still on the go. This mock trading by MCX is happening since the last week of the month of June because Sebi had allowed and issued norms for the launch of commodity options on 14 June. He also added that he wishes to conduct few more awareness campaigns because it is a new instrument for commodity investors. They will fix a date for the launch only after they feel that their members and bullion traders are ready and comfortable.

The legal news also points out that the exchange is also improving its technology as they are expecting an increased participation after one year of the nifty option chain launch and they would be ready to launch gold options by October. Though all the systems at the exchange are all set for the launch but the exchange has not finalized a date yet. MCX is ensuring that members and hedgers are prepared to trade in options before that.

The mock trading by MCX has a participation of more than 60% to 70% of the members and is going smooth as of now. But the exchange is still waiting to have even more participation. The exchange is going to give a fixed date only after 95% of the members test the system.

Options trading is hoping to deepen the market by inviting the new investors and boosting the corporate participation. As per the recent announcement, SEBI had allowed Category III Alternate Investment Funds to invest in the commodity futures market. It allowed and issued norms for the launch of commodity options in June. The regulator has initially allowed only one commodity option per exchange.

As per the Sebi rules, the Non-agricultural commodities need to have an average turnover of Rs. 1,000 crore and the commodity needs to be in the top five list in terms of daily turnover. On the basis of this criterion, MCX has chosen gold because it is the most liquid commodity on its platform.

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