Sebi may let procuring agencies use derivatives market to set MSP

MUMBAI: Market regulator Sebi Friday said it is looking to allow government agencies to use commodity derivatives platform to administer the minimum support price (MSP) and launch new products such as indices, weather and freight derivatives soon.

"We want to help procurement agencies on behalf of the central and state governments to use this (commodity derivatives) market, to administer their MSP," Sebi's whole-time member SK Mohanty said at an event organised by MCX.

MSP is a form of market intervention by the government to insure agricultural producers against any sharp changes in farm prices.

With this, the government agencies would be able to buy and sell commodities they are asked to procure on the derivatives platform.

While addressing the gathering during the inaugural session on the developments in the commodity derivatives market, Mohanty said, the market regulator is also looking to launch new commodity products such as indices, weather, and freight derivatives soon.

"We are in the advanced stages of examining index derivatives," he said. Mohanty pointed out that there is a demand from the market participants for options, but there is some legal hiccup in that, and Sebi will soon address that.

"This will be helpful to farmers who can buy put options and relax, and take care of their crisis management," he said.
Mohanty noted that from December onwards agricultural commodity warehouses would also start issuing negotiable electonic warehouse receipts.