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Informist, Thursday, Jun. 26, 2025

 

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--NSE: To announce electricity futures contract launch date in 2-3 weeks
--CONTEXT: NSE officials' comments at a media session in Delhi
--NSE: Minimum margin for electricity futures trading to be 12-15%
--NSE: Electricity futures contract trading unit to be 50 MWh
--NSE: Sought SEBI nod for co-location facility to brokers for commodity F&O
--NSE Krishnan: May waive fee on electricity futures trade 6 mos from launch
--CONTEXT:NSE Chief Business Development Officer Krishnan's remarks at event
--NSE Krishnan: Margin fungibility to give NSE edge in electricity futures
--NSE Krishnan: Margin fungibility available to NSE brokers across segments
--NSE: To have 4 monthly electricity contracts at any given point in time
--NSE: Maximum order size for electricity futures contracts to be 2,500 MWh

 

By Rajesh Gajra

 

NEW DELHI – The National Stock Exchange of India Ltd. will issue a circular to its commodity derivatives brokers in the next 2-3 weeks announcing the launch of electricity futures on its commodity derivatives segment, Sriram Krishnan, chief business development officer at NSE, said at a media conference here Thursday. The trading unit for these contracts will be in multiples of 50 megawatt-hour, but will be subject to a maximum order size of 2,500 MWh, according to the exchange.

 

The final settlement price will be based on the due date rate, which will be determined on the basis of Power Exchange of India's market clearing prices averaged for all days of the expiry month, NSE said. Krishnan said the exchange may waive transaction fees on electricity futures trade for the first six months from the launch date.

 

According to NSE, electricity generators, corporate buyers of electricity, financial institutions, and larger retail consumers of electricity such as hotels and malls, can hedge their price exposure through electricity futures. The contract is also open to trading from brokers, ultra-high networth individual investors, and retail traders, NSE officials said.

 

NSE's Krishnan said the exchange will have an edge over the competition due to availability of margin fungibility for its trading members across trading segments in equity, commodities, and debt markets. NSE officials said the minimum margin on electricity futures trading will be 12-15%. Since the minimum trading lot will be 50 MwH, the minimum trading value at current spot power rates will be around INR 250,000-INR 300,000 but may fluctuate with the volatile power rates. The contracts will be settled in cash on expiry day.

 

In the first phase, there will be four monthly electricity futures contracts at any given point in time, according to NSE. But more contracts and products, with different tenors and contract types, are in the pipeline, the exchange added.

 

Krishnan said high-frequency trading interest from large institutional or professional investors will aid liquidity in the electricity futures contracts, but for this they need to have the option of putting their servers in a co-location facility. Currently, regulatory approval for a co-location facility is available for the equity cash and derivatives segment but not for the commodity derivatives segment. According to Krishnan, NSE has sought approval from the Securities and Exchange Board of India to offer a co-location facility to its trading members in commodity derivatives.

 

Earlier this month, the Multi Commodity Exchange of India Ltd. announced that it had got SEBI's approval to launch electricity futures, and it will likely announce the launch date for the same in the next few weeks or months. On a query from Informist on how NSE will handle competition, Krishnan said the entire ecosystem comprising trading members, their trading applications and bouquet of products for clients, and retail investors, is now connected to the NSE's commodity derivatives platform.

 

NSE launched options contracts on crude oil and natural gas in October 2023 but has not been able to make enough of a dent in the large trading volume in these two contracts on the MCX. Krishnan said "the playing field was not level" in October 2023. Krishnan said it took NSE almost 18 months to get around 250 trading members connected to the NSE commodity derivatives platform and offer the commodity futures and options products to their clients.

 

Now, the ecosystem is connected, and additionally, many retail customers have come to NSE's commodities derivatives platform through brokerages such as Zerodha, Upstox, and Paytm, Krishnan said. These retail platforms take a lot of time to make available a new product on their application with a lot of testing on the front and back ends, and getting certified, he added.

 

This was "a challenge for us up until now," Krishnan said. Despite lagging behind in trading volume in crude oil options, the price spreads are on par with the other exchange, he said.

 

According to the NSE's chief business development officer, the biggest advantage that NSE offers is the availability of margin fungibility across various asset classes. This is not available on the commodities-only exchange, he said.

 

"So we believe that foreign investors who have been trading equity derivatives on NSE for some decades would find it extremely easy to trade across equity cash, equity derivatives, and commodity derivatives because operationally they don't have to do anything as such," Krishnan said. Being a multi-asset exchange is the biggest plus point for NSE, he said. Trades on electricity futures, like other commodity derivatives products, on the NSE will be settled by the exchange's clearing agency, NSE Clearing Ltd.  End

 

Edited by Tanima Banerjee

 

 

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