NSE receives in-principle approval from Sebi for electricity derivatives

The National Stock Exchange (NSE) has received in-principle approval from the Securities and Exchange Board of India (SEBI) to launch electricity derivatives, as stated by the company's management during an analyst call on Wednesday, following the announcement of its fourth-quarter earnings.

However, the plan is still in the early stages, and the structure of the contracts has yet to be finalized. "We have just begun the process. We have the in-principle approval, and we are still discussing the terms of the contract with the regulators. There is a lot of capacity building required before we can launch this product," a member of the company's management said during the call.

The NSE also noted that Indian regulators favor introducing shorter tenures for contracts, such as half-yearly or monthly contracts, whereas many other countries typically offer yearly contracts. The specifics are still under discussion with the regulators.

SEBI will regulate the derivatives market, while the spot market is outside its jurisdiction. "We believe NSE has an advantage in this market due to its advanced technology compared to many other players," the official added.

Furthermore, the NSE management stated that the exchange is unlikely to lose any additional market share in the derivatives segment to its rival, the Bombay Stock Exchange (BSE). The impact on market share followed regulatory changes by SEBI, which limited weekly expiries to one benchmark per exchange.​