On January 14, 2018, Union Finance & Corporate Affairs Minister, Arun Jaitley launched India’s First Agri-commodity Options in Guar Seed on National Commodity and Derivatives Exchange Limited (NCDEX) platform.
Launch of India’s First agri-Options on NCDEX:
The launching ceremony was held in New Delhi in presence of farmers & Farmer Producer Organizations (FPOs) from various States of India.
- Options contract offers the buyer the right, but not the obligation, to buy or sell a stock/commodity/asset at an agreed-upon price (referred to as strike price) during a certain period of time up to a specific date.
- Guar seed options, which have been uniquely designed by NCDEX and approved by the Securities and Exchange Board of India (SEBI), will prove to be a useful tool for farmers in hedging the price fluctuation risk.
- In June 2017, SEBI had granted approval to commodity exchanges to launch options trading. However, one of the important conditions was that, the Options contract of only those commodities that are among the top five in terms of total trading turnover value of previous 12 months will be permitted.
- It is to be noted that Guar Seed is one of the most liquid futures contracts on the NCDEX platform. Informal options trading in this commodity is already taking place at several informal trading Centres and in some communities of Rajasthan.
- In order to create awareness about this new agriculture hedging tool, NCDEX has initiated a series of awareness and trainings programmes. It will also launch a mobile application which will help farmers to learn more about agri options and the commodities market.
- NCDEX has played an important role in hedging/trading of agricultural commodities in India. As of December 2017, 59 FPOs across various States of India have participated on NCDEX, and more than 2.3 lakh farmers have already opened their trading account.
Quick Facts about NCDEX:
- Founded in – 2003
- Headquarters – Mumbai, Maharashtra
- Current MD & CEO – Samir Shah