Sebi to allow futures trading in degummed soya oil soon

Currently, traders import degummed soya oil without hedging any price risk on futures exchanges

Markets regulator the Securities and Exchange Board of India (Sebi) is all set to allow futures trading in degummed soya oil soon.

Commodity exchanges, primarily the National Commodity & Derivatives Exchange (NCDEX), had applied to Sebi seeking permission for launch of futures trading in degummed soya oil. According to exchange source, NCDEX has also applied to Sebi to allow futures in yellow peas, black pepper, RM seed cake or meal. The exchange is also planning for relaunch of chana futures, which were suspended last year on the wake of very high price rise, now that the prices have moderated. 

Of these, pepper and chana will be relaunched. Even the Multi Commodity Exchange (MCX) is also awaiting expansion of its agri commodity basket and it has proposed a few more agri commodities; it is awaiting Sebi approval.

Speaking to Business Standard, a Sebi source said, "We would soon allow futures trading in degummed soya oil to all commodity exchanges, including NCDEX and MCX.”

The source, however, did not specify any timeline for the permission but said that the permission was in the final stage.

"Now, it is up to an exchange to develop the contract and attract participants. We will allow futures trading for all exchanges," said the source.

Degummed soya oil is a crude oil imported into India largely from Argentina and Brazil to meet the growing deficit of edible oil. Data compiled by the apex industry body, the Solvent Extractors’ Association show India’s total import of degummed soya oil at 4.2 million tonnes for the period between November 2015 and October 2016.

The imported quantity of degummed soya oil is nearly 50 per cent higher than the total agri commodity managed by all warehouse service providers (WSPs) across all futures commodity exchanges. All WSPs cumulatively manage around 3 million tonnes of agri commodity volume across all futures exchanges in India.

A senior trade official said that Indian traders currently import degummed soya oil without hedging any price risk on futures exchanges. "Once this instrument becomes available, Indian traders will immensely benefit as they would be able to cut their losses by ensuring price risk on derivatives platforms," he added.

Currently, exchanges in India offer futures trading in soyabean, refined soya oil and oilmeal. After allowing futures trading in degummed soya oil, the soya complex would become complete in terms of hedging and price discovery in domestic exchanges.