NSE launches WTI Crude Oil and Natural Gas futures contracts

The stock exchange had received Securities & Exchange Board of India’s (SEBI) approval to introduce these futures contracts in March this year.

NSE had earlier signed a data licensing agreement with CME Group allowing NSE to list, trade and settle rupee denominated NYMEX WTI Crude Oil and Natural Gas derivatives contracts on its platform. 

The launch of these contracts will provide effective trading and hedging opportunities to the market participants, with the availability of key energy products on a single trading platform, the bourse said.

“With NSE Clearing Ltd providing settlement guarantee and ease of collateral fungibility across all NSE market segments, we hope that these two contracts will provide market participants with an efficient avenue to hedge their price risk and meet their trading objectives,” said Shri Sriram Krishnan, Chief Business Development Officer, NSE.

Analysts believe the development will enhance trading in the commodity and energy markets and will help investors at large.

“MCX has a strong presence in commodity and energy derivatives trading. WIth the entry of NSE, the competition in the market is set to rise which will ultimately benefit retail traders and investors,” said Ajay Kedia, Director, Kedia Advisory.

While expecting no immediate major impact on MCX volumes, Kedia said that NSE can get an advantage of its huge equity client base.

“NSE has a huge equity client base and it can leverage this to its advantage. Moreover investors will now also get an arbitrage opportunity while trading in these contracts,” Kedia said.

Moreover, with the foreign portfolio investors (FPIs) now allowed to participate in cash settled non-agricultural commodity derivative contracts and indices, it would benefit the overall commodity derivatives market, he added.

WTI is the underlying commodity of the New York Mercantile Exchange’s (NYMEX) oil futures contract. The crude oil derivatives, Brent and WTI, are the most traded products in the commodity derivative space.