NSE BSE T0 launch gold options on stock prices

For the first time ever, the leading stock exchange Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have launched contracts on spot gold prices, which will roll on to the Indian markets from June 8.

Here is everything you need to know about the gold and silver contracts

On May 23, 2020 (Saturday) the National Stock Exchange (NSE) announced ‘Gold Option’ in the commodity derivatives segment. It is an effort to boost the market share during this coronavirus pandemic.

During the release NSE, stated, the SEBI approved the ‘Option’ in good contracts on gold spot price in the trading community.

It will kick start from June 8, 2020 as ‘Mini Gold Options’ from Monday to Friday while the trading period will be from 9:00 AM to 11:30 PM or 11:45 PM EST, that is, based on the United States time. In addition, the National Stock Exchange will also provide the ‘Mini Gold Contract’ under the liquidity enhancement scheme. It is authorized by the SEBI regulator.

While, BSE will launch silver kilo and gold mini options from June 1, 2020.

Due to coronavirus pandemic, the small and medium firms face challenges and crisis, therefore, the leading stock exchanges BSE and NSE reduced the listing fee by 25 percent for the SME platforms, so that the small and medium enterprises can cope up with the market. Whereas, further Finance Minister Nirmala Sitharaman proposed the relief of the ailing micro, small, and medium enterprises as known as the MSME sector.

The revised listing is applicable for both the current firms and the companies waiting to be listed on the exchange, BSE added. It is beneficial for the jewellers and traders who can now avoid risk at low cost and avail delivery on expiry of the contract, as per the statement of Ravi Varanasi, Chief Business Development Officer.

The regulation will be as per the European style, the purchase or sale of the underlier will be at a fixed price with a future date. The buyer has no obligation to take or give deliver but the seller can do the same.

Gold Options

The gold option unit in NSE will be 100 grams while the base value is Rs 10 grams. The delivery unit is limited to 100 grams whereas the order size is 10 grams. For now, it is deliverable to three cities Ahmedabad, Delhi, Mumbai and Chennai.

Compete with MCX

MCX, the stock exchange with the highest energy and metals commodity derivative segments (CDS). It has nearly 94 percent of market shares in FY20. Whereas, National Commodity & Derivatives Exchange Limited (NCDEX) holds the 1 percent of the market shares and rest one percent by Bombay Stock Exchange (BSE), Indian Commodity Exchange (ICEX), National Stock Exchange (NSE) in the following order.

Along with gold and silver MCX has Crude Oil contracts but they are involved in future contracts on a particular date.  Since it is for the first time, NSE and BSE will only offer silver and gold contract options.

Closing Thoughts

India entered the coronavirus outrage with a huge economic crisis and the economy depleted further in lockdown. SMEs are the backbone of the nation’s economy while we are on the driver’s seat. The steps taken by the authority and government will help to revive SMEs and motivate other SMEs for listing and ultimately there will be a rise in the Indian Economy.