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NSE Launches Commodity Futures Contracts on Gold & Silver

Nagendra Kumar, Chief Business Officer, National Stock Exchange of India Ltd


Congratulations for starting the commodity derivatives segment at NSE on October 12, 2018. NSE is the market leader in equity, equity derivatives, forex and debt market segments in India. NSE is known to redefine the marketplace, wherever it has entered. So, what are the goal or priorities that NSE has set for itself for the commodity derivatives space for the short term, medium term and long term?

Thank you for your kind wishes.

As you would know, NSE has been a game changer in most of its initiatives whether it is the shifting of entire market ecosystem to the current screen based trading system, introducing the concept of settlement guarantee fund in the markets, setting up of depository or introducing new and innovative products and commodities will be no different.

We would like to focus on three key pillars for development of the commodity space in India, which are : Innovation, Trust and Liquidity. We aim to introduce innovative products which shall meet the best in class global standards and at the same time are able to meet the requirements of the domestic market. We are confident that the products offered by NSE would redefine the dynamics of the Indian Commodity market. NSE’s investor base has grown manifolds not just within the country and but also beyond the national boundaries. Our commitment towards investor well-being has also been appreciated by the investors which is evident from the broad based participation in all our products. This broad investor participation has been our key to enhanced liquidity and we aim to build on this.

In the initial stages we plan to focus on deepening the commodity markets by leveraging on our nation-wide reach. Further as we have more liquidity on our commodity platform we shall concentrate on adding more commodities to our product offerings and also to introduce Indian commodity markets to some of the new commodity contracts which are not already explored by the domestic markets. We shall also be working on bridging gaps in the commodity products by collaborating with the key domestic commodity market players and considering their feedback. Our long term objective is to bring Indian commodity markets at par with the global benchmarks and make an attempt to be recognized as price setters in the international markets. We would also work with the regulators wherever required to bring about radical changes in the existing domestic market framework to make commodity derivatives a viable hedging option for all market participants.

We also have various other initiatives on our agenda which shall help in bring in a holistic development of the entire commodity market.

We have seen NSE entering into a series of tie-ups with several commodity associations. What is the game plan? Many of these have already got MoU signed with other exchanges. So, how would NSE association be any different or what additional value does the partnership bring forth?

NSE has played a pivotal role in transforming the securities market and shall continually work towards positive transformation wherever the market needs the same. We all know how the Indian securities market used to function prior to NSE and how NSE has revolutionized the entire space.

NSE’s tie-up with the commodity associations have a strategic goal in mind and shall play a vital role in reforming the commodity market space in India. As you may be aware, one example of NSE’s tie-up with global associations is the MOU that was recently signed with Alex Stewart International, who is the leading global player in precious metals inspection and analysis, to help develop the existing physical settlement framework for commodity derivatives markets. This shall also facilitate in introduction of high quality standards for delivery of bullion bars through the exchange platform.

Further we also need to keep in mind that the various domestic commodity associations have been around for a very long time in the commodity markets for example the India Bullion and Jewellers’ Association (IBJA), with whom NSE has signed an MOU, has been around for almost 100 years now. Collaborating with such esteemed associations helps NSE in learning from the knowledge and experience that they have gained over such a long period of time. The exchange believes in learning from the practical experiences shared by the widespread members of such associations and respond to the changing needs of business. The alliance with such associations offers NSE an added advantage in building, enhancing as well as developing the commodity market as a whole.

On the other hand, another key objective of collaborating with the domestic commodity associations is that it helps in reaching out to the widespread investors. As I said earlier, NSE works towards deepening the commodity markets in India and for this NSE conducts many awareness and educative programmes for end investors, even for the existing segments. For commodity derivatives segment also NSE plans to conduct such awareness and educative programmes for the benefit of the end investor. In this regard conducting joint programmes with the commodity associations shall ensure that we are able to reach out to a larger and more authentic investor base.

Coming specifically to gold and silver, what are the products that NSE has launched in gold and silver for now? What are key differentiators in these products? What is the value preposition to a member who is trading these products either overseas or in any other Indian commodity derivatives exchange now?

To start with we have launched commodity futures contracts on bullion commodities i.e., Gold and Silver. 3 futures contracts are available for trading viz., Gold (1 Kg), Gold Mini (100 gms) and Silver (30 Kg). All the contracts are compulsory physical delivery contracts.

However this is just the beginning and we are keen on bringing in some significant changes in the way commodity contracts are been traded and settled in India like introducing delivery settlement across multiple delivery centres in India, introducing high quality standards for delivery of bullion bars through the exchange platform and so on. We are also working on the launch of several other contracts in other commodity categories like base metals, energy and even agri in the near future.

Trading on NSE platform would offer various advantages to the members like all asset classes available under one roof. Thus NSE is a one stop shop for the members where they can trade in a wide array of products. This in turn means that the members can leverage and make effective use of their capital by seamlessly transferring across the different product segments. Further engagement with only one largest exchange i.e., NSE, for all exchange related compliances, facilitates operational efficiency and reduces the compliance cost for members. NSE already has a CCP model in place which offers a robust clearing & settlement and risk management framework.


Disclaimer: Views are personal and not the views of the publisher.