BSE set to introduce future contracts on brent crude oil in commodity derivatives segment

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Published: January 15, 2020 10:23:14 AM

Sebi had asked exchanges to put in place a mechanism to ensure that the LES did not create artificial volumes, did not take away liquidity form the market, is not manipulative in nature and will not lead to mis-selling of the product in the market.

BSE said it may also launch a liquidity enhancement scheme on this contract, subject to Sebi approval.

The BSE on Tuesday said it will introduce future contracts on brent crude oil from January 27. In a circular, the BSE said, “Exchange shall introduce futures contracts on brent crude oil in commodity derivatives segment with effect from January 27, 2020.” In another circular, the BSE said it may also launch a liquidity enhancement scheme on this contract, subject to Sebi approval.

In an earlier circular during the day, the BSE had said the scheme will start from February 1, subject to approval, but the circular was later revised. In the latest circular, the BSE said, “Exchange may introduce liquidity enhancement scheme (LES) in brent crude oil futures in commodity derivatives subject to regulatory approval.” Under the liquidity enhancement schemes (LES), brokers and other market intermediaries are given incentives for a specified period of time to bring in liquidity and generate investor interest in securities that have limited trading activity.

The introduction of the scheme would be subject to the approval of market regulator Sebi, it added. Earlier in March 2018, markets regulator Sebi had said “sensitive” commodities that are prone to frequent price fluctuation as well as government interventions will not be eligible for LES.

Sebi had asked exchanges to put in place a mechanism to ensure that the LES did not create artificial volumes, did not take away liquidity form the market, is not manipulative in nature and will not lead to mis-selling of the product in the market.

A commodity derivative product is considered to be ‘liquid’ on the basis of average daily turnover. In the case of agriculture and agri-processed commodities, the threshold is Rs 200 crore while it is Rs 1,000 crore for non-agricultural commodities.

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