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๐“๐ก๐ž ๐Œ๐ข๐ง๐ข๐ฌ๐ญ๐ซ๐ฒ ๐จ๐Ÿ ๐…๐ข๐ง๐š๐ง๐œ๐ž ๐š๐ฉ๐ฉ๐ซ๐จ๐ฏ๐ž๐ฌ ๐ญ๐ซ๐š๐๐ข๐ง๐  ๐ข๐ง ๐๐ž๐ซ๐ข๐ฏ๐š๐ญ๐ข๐ฏ๐ž ๐จ๐Ÿ 11 ๐ฆ๐จ๐ซ๐ž ๐œ๐จ๐ฆ๐ฆ๐จ๐๐ข๐ญ๐ข๐ž๐ฌ

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The Department Of Economic Affairs, Government Of India under the Ministry of Finance by a recent notification dated March 1, 2024, has brought amendments to the Schedule under clause (bc) of Section 2 of the Securities Contracts (Regulation) Act, 1956 (SCRA) pertaining to commodity derivatives. This amendment made in consultation with SEBI has added 11 more commodities thereby increasing the total number of approved commodities for derivative trading from 91 to 104. The new commodities added to the commodity derivative segment include skimmed milk powder, cement, apple, bamboo, timber, etc.

However, the new notification is only an enabling provision, which does not imply that the trading will start immediately. The exchange will first study the potential and submit a report to SEBI which then shall be appraised by SEBI and be allowed only on reckoning a high demand. Further, other market participant associations will also have to grant their approval before such trading can be undertaken.

Moreover, in pursuance to the above, the Ministry of Finance has issued another notification under sub-clause (D) of clause (ac) of section 2 of the SCRA to declare as a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell in future, such underlying goods, as notified under clause (bc) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956), as a โ€˜derivativeโ€™ for the purposes of the said Act.

Interestingly, in the past SEBI has prohibited derivative trading in various commodities such as wheat, paddy, chana, mustard oil, soya bean, etc. Such prohibition could likely be on account of possible impact on inflation. Such prohibition in various commodities is continuing till date. Thus, it is now to be seen whether this new addition to the Schedule will strengthen the financial and commodities market by allowing transparent price discovery.

Readers are welcome to share their views with Regstreet Law Advisors on info@regstreetlaw.com.

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