BSE - First Exchange to Launch Commodity Derivatives Contracts

Sameer Patil, Head, Business Development, BSE Limited

Congratuations for successful launch of INR denominated commodity derivatives contracts on October 1, 2018, starting with gold and silver futures. What are the key target product / market opportunities that BSE plans to focus on in the next six to 12 months? How are you planning to capture the market share?

BSE became the first Universal exchange in the country with launch of commodity derivatives contracts on October 1, 2018. BSE’s entry into commodity derivatives market benefits market participants in terms of best governance practices, competitive pricing, robust risk management system and best-in-class technology to enhance the overall growth of the commodity markets. BSE has partnered with all the stakeholders and industry participants to develop products suitable to the markets. Bse has leveraged its existing member’s strength to create a liquid market place. BSE has the lowest membership fees and transaction charges.BSE will rely on the above strengths to gain market share, but our principal focus remains providing efficient platform and services for market participants.

BSE has partnered with Bombay Metal Exchange Ltd, Federation of Indian Export Organisations (FIEO), Cotton Association of India, Gems and Jewellery Council, Rajkot commodity Exchange and Soybean Processors Association of India (SOPA).

BSE plans to launch other commodity derivatives both in non-agri and agri segment all these products will be developed in partnership with the industry participants. The Exchange will soon offer insurance distribution services on the lines of our highly successful Mutual Fund distribution platform i.e. BSE StAR MF.  BSE remains open to any other new market opportunities that might arise in future due to dynamic business environment.  

A related question to the above, what are the key differentiators in BSE gold and silver futures contracts? What are the value prepositions to the members?

BSE differentiates itself with others in terms of best technology infrastructure, wide distribution reach, compliance and work closely with stakeholders / partners. BSE’s core focus has been to launch deliverable products, this will encourage greater market participation in commodities derivatives market and enhance the linkages between commodity spot markets and commodity derivatives markets.

BSE brings a wide range of value prepositions to its members. BSE has waived off transaction charges for all our registered members for the first one year i.e. till September 30, 2019 in the commodity derivatives segment to encourage greater participation. The contracts are highly liquid with lowest bid-ask spread which has encouraged huge participation from industry helping BSE gain respectable volumes in a short span of less than a month.

BSE's approach always has been to design products that serve the dynamic needs of market participants. For the growth and systematic development of commodity derivatives markets, and also to deepen the understanding of commodity derivatives among stakeholders, BSE has entered into partnerships and alliances with various industry participants. The synergy between BSE and these industry participants will help in launching new and innovative products, adding more value to the existing commodities value chain and ecosystem.

India INX trades dollar denominated gold futures contract. Do you see a synergy between the India INX and BSE gold futures contract going forward? Is that a unique value preposition?

Since January 2017, India INX has been offering trading in various asset classes including gold futures contract. BSE will leverage existing infrastructure i.e. trading, clearing, settlement, delivery, surveillance, data feed and also learn from India INX experience. In a way, we leveraged on our learnings and experience at India INX to offer unique value preposition to our market participants at BSE.

Gold futures contract on BSE and India INX are different in certain ways. In terms of settlement type, gold futures are cash settled at India INX while it is compulsory delivery in the case of BSE gold futures. Further, gold futures contract on India INX is settled in US dollars. Going forward, we will be leveraging experience at both India INX and BSE for the growth and development of overall commodity derivatives market in India including gold futures market.

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