SEBI Introduction of Options on Commodity Indices

CIRCULAR NO. SEBI/HO/CDMRD/DNP/CIR/P/2022/34, Dated: 24.03.2022

With a view to having more products in the ‘Commodity Derivatives Market’ and based on the recommendation of ‘Commodity Derivatives Advisory Committee’ (CDAC) and proposal from Stock Exchanges, the SEBI has decided to permit Stock Exchanges having a Commodity Derivative segment to introduce options on commodity indices with the prior approval of the board.

SEBI further prescribed that the recognized Stock Exchanges with a Commodity Derivative segment, willing to introduce trading in options on commodity indices shall take prior approval of SEBI for the same.

SEBI has required Stock Exchanges to submit at-least past three-years data of the index constructed along with data on monthly volatility, roll over yield for the month and monthly return while seeking approval from SEBI. On approval, the Stock Exchange(s) shall also publish the above data on their website before launch of the contract.

Stock Exchanges have also been directed by SEBI to make necessary disclosures, such as, the open interest of top 10 largest participants/group of participants in “option in indices” (both long and short) and the details of their combined open interest in underlying constituents etc., in line with SEBI circular no. SEBI/HO/CDMRD/DNPMP/CIR/P/2019/08dated January 04, 2019 regarding “Disclosures by Stock Exchanges for commodity derivatives”.

Stock exchanges shall have to put in place adequate monitoring and surveillance capacity for the options on indices contracts.

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