NSE is looking to capitalise on the expected growth in commodities trading within the country
National Stock Exchange (NSE) is bullish on the prospects of commodities trading in India as it looks to increase its presence in the space. NSE's Chief Business Development Officer Sriram Krishnan said that commodity trading volume should pick up over the next few years.
Speaking to reporters in the national capital, Krishnan highlighted that investor interest in the segment is limited as of now. "If you look across the world, commodities markets are much bigger than equity markets. However, the reverse is true in India which gives a lot of headroom for growth," he said.
Currently, most of the commodity trading happens on Multi Commodity Exchange of India Limited (MCX). NSE has around five per cent market share in commodities trading.
Krishnan highlighted that NSE has already attracted interest from domestic as well as foreign investors. "Around 240 members have started trading on our commodities platform. Forty five foreign investors are also participating in the trading," he said.
According to the data provided by Krishnan, one billion barrels of crude oil has been traded through the commodities platform. In the last few weeks, the firm is also seeing jump in open interest in contracts which reached 6 lakh recently in crude oil.
For settlement prices, NSE has signed an agreement with Chicago Mercentile Exchange (CME). The exchange is only going to focus on non-agri commodities, mainly energy, gold and base metals.
The thrust on commodities come amid an expected dip in equity derivative trading. SEBI released new rules last month to curb exuburence of retail investors in the futures and options market. The regulator has introduced several measures, which include increasing the contract value and restricting number of weekly contracts.
Krishnan said that the move will definitely hit derivative trading volume. For the unversed, NSE holds around 90 per cent market share in derivative trading.
However, Krishnan noted there could be a silver lining to the move. "Some traders in equity derivative market can move to commodity trading as well. We will have to wait and see but this is a possibility," he said.