Finance

NSE & BSE Struggle for Settlement Prices

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When the domestic market regulator Securities and Exchange Board of India (SEBI) announced about
the unified exchange regime from October 1, 2018, India’s leading exchanges BSE & NSE planned to enter the commodity derivatives market. Soon, the National Stock Exchange (NSE) started finalizing its list of commodity products to be launched on its platform and already applied for commodity derivatives two weeks ago. Seeing that, another major stock exchange of India Bombay Stock Exchange (BSE) followed the footsteps of NSE and applied for the license of commodity derivatives platform. The reason behind this is to match the timing of the commodity market.

Everything was going better than expected but now there are chances that the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) may face some problems in getting settlement prices for non-agri commodity contracts. Since they both applied for it, once their applications approved by the SEBI, they can simply start commodities trading from October 1 of this year. Coincidently, both exchanges are planning to start with non-agri commodities like precious metals, crude oil, natural gas, and base metals etc. Right now, the non-agri segment is dominated by Multi Commodity Exchange of India (MCX) which has agreements with both London Metal Exchange (LME) and Chicago Mercantile Exchange (CME) for settlement prices of energy and base metals.

It clearly indicates that the domestic major exchanges BSE & NSE will have a tough competition with existing exchanges LME and CME. This is why both domestic exchanges have been in talks with CME and LME for settlement prices; but due to exclusive contracts between LME and MCX, BSE & NSE has some difficulties in getting the settlement prices.

Apart from international exchanges, BSE is in talks with the Indian Bullion and Jewellers Association to
get settlement prices for gold contracts. Before that BSE made a pact with Sohan Lal Commodity
Management (SLCM) for preparing to launch the commodity derivatives. But, BSE is not the only one preparing for commodity derivatives. Even the National Stock Exchange is also taking settlement prices with leading exchanges.

Meanwhile, the commodity market participants are requesting that base metal contracts should be
settled in Indian prices. Even SEBI is looking for ways to constraint resident Indians from speculating on International Exchanges.
There are still few months left. Let’s see if BSE and NSE manage to get the settlement prices and find a
way to get this done as soon as possible.

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