BSE to introduce liquidity enhancement scheme in brent crude oil from Feb

With an objective to boost trade in the commodity derivatives segment, the BSE on Tuesday said it will introduce liquidity enhancement scheme in brent crude oil futures from February 1.

Under the liquidity enhancement schemes (LES), brokers and other market intermediaries are given incentives for a specified period of time to bring in liquidity and generate investor interest in securities that have limited trading activity.

In a circular, the BSE said the exchange "shall introduce liquidity enhancement scheme in brent crude oil futures in commodity derivatives with effect from February 1, 2020".

Earlier in March 2018, markets regulator Sebi had said "sensitive" commodities that are prone to frequent price fluctuation as well as government interventions will not be eligible for LES.

Sebi had asked exchanges to put in place a mechanism to ensure that the LES did not create artificial volumes, did not take away liquidity form the market, is not manipulative in nature and will not lead to mis-selling of the product in the market.

A commodity derivative product is considered to be 'liquid' on the basis of average daily turnover. In the case of agriculture and agri-processed commodities, the threshold is Rs 200 crore while it is Rs 1,000 crore for non-agricultural commodities.