Sebi panel weighs risks as MCX pitches weekly bullion index options

Subscribe to enjoy similar stories.The Multi Commodity Exchange of India (MCX) has proposed launching weekly index options for its bullion derivative index, the MCX Bulldex, according to two people familiar with the matter. The proposal is currently in the early stages of discussion within a regulatory committee, they added."The matter is being discussed in the commodity derivatives advisory committee (CDAC) of Sebi (Securities and Exchange Board of India) but no decision has been taken yet.

Weekly options pose a risk in commodities and may hurt retail investors, so this will be discussed thoroughly,” said the first person cited above.“MCX has to ensure that the weekly index options do not just bring in temporary volume to the exchange but have both breadth and depth in terms of multiple commodities being spread out over several months while having adequate liquidity in the market,” he added.The discussions are still in the preliminary stages and the committee is nowhere near a final decision.The MCX Bulldex is based on the MCX iComdex Bullion Index, which tracks the prices of gold and silver. The Bulldex is settled in cash and involves no physical delivery, unlike the standalone gold and silver derivatives, which require physical delivery.The second person said, "A very early stage discussion is under way on this as such a contract will draw volumes which are currently absent on the monthly MCX Bulldex futures and options contracts.”Both sources spoke on the condition of anonymity, given the highly sensitive nature of the matter.