The National Stock Exchange is launching the rupee-denominated NYMEX WTI Crude Oil and Natural Gas futures contracts in its commodity derivatives segment on May 15.
The exchange had earlier signed a data licensing agreement with CME Group allowing the NSE to list, trade and settle rupee-denominated NYMEX WTI Crude Oil and Natural Gas derivatives contracts on its platform. These contracts will be cash-settled and no transaction charges will be levied till October 31.
The NSE WTI Crude Oil and Natural Gas contracts will be settled in the rupee on the NYMEX (CME Group) WTI Crude Oil and Natural Gas front month contract’s settlement prices, respectively. WTI is the underlying commodity of the New York Mercantile Exchange’s (NYMEX) oil futures contract. The Henry Hub futures contract (NYMEX) is one of the most traded natural gas futures contracts globally due to its price transparency and robust liquidity.
In the past few days, the NSE has reached out to brokers to get them to sign up for the products, according to sources. The exchange may launch more products in the commodity segment in the near future, and is hoping to build the same kind of liquidity pool which is available in its other segments such as equity and equity derivatives.
“The members will get a good idea about the free collateral available with them by 5 pm and they can use this free collateral in a fungible manner across equity, equity derivatives and currency segments. This is because all these products are available for clearing and settlement through a single clearing corporation (NSE Clearing) which will benefit in terms of capital efficiency,” said an industry official.
At present, the equity and the currency markets close by 3.30 pm and 5 pm, respectively.
The exchange is also hoping to attract foreign portfolio investors, including individuals, family office and corporate FPIs, to trade in the products. Direct market access and algo trading facilities will be made available for FPIs, which have been allowed to trade in non-agri cash-settled commodity products.
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“It has always been NSE’s objective to provide market participants with a suite of dynamic and robust financial products. The addition of these contracts will expand NSE’s product offering in the energy basket as well as its overall commodity segment. NSE hopes that these contracts provide market participants with an efficient avenue to hedge their price risks and meet their trading objectives,” said a note by the NSE.
Currently, the MCX enjoys a monopoly in commodities trading, with more than 90% market share.