NSE to launch India's first energy derivative, Natural Gas Futures

The National Stock Exchange (NSE) is set to launch India's first exchange-traded energy derivative on July 27. The Indian Natural Gas Futures contract will be cash-settled and benchmarked to domestic prices to foster transparent price discovery.

The National Stock Exchange (NSE) will launch trading in India's first exchange-traded energy derivative linked to a domestic benchmark on July 27, with the introduction of Indian Natural Gas Futures. The cash-settled contract is aimed at enabling transparent, India-centric price discovery for the domestic natural gas market.

In a post on X, NSE said, "India's first exchange to introduce Energy Derivatives referenced to a domestic benchmark. A new milestone in India's commodity derivatives market."

Contract Specifications and Approval

According to an earlier NSE circular, the exchange has received approval from the Securities and Exchange Board of India (SEBI) to launch the contracts in its commodity derivatives segment. Trading will begin on July 27, with monthly contracts available as per the launch calendar. The contracts will trade under the symbol NATGASIND and will be cash settled.

The underlying benchmark will be the Indian Gas Exchange's (IGX) Gujarat (Dahej) hub price, quoted in rupees per mmBtu, excluding transportation charges, taxes and other fees. The trading unit has been fixed at 250 mmBtu. Contracts will be available for trading from Monday to Friday.

Settlement and Risk Management

NSE said the final settlement price will be based on the monthly weighted average price of actual deliveries on the Indian Gas Exchange during the contract month, excluding gas traded at ceiling prices, ssLNG transactions and long-duration contracts.

NSE Clearing will provide clearing, settlement and risk management services for the contracts. The exchange said mark-to-market settlements will be based on daily closing prices, while initial, extreme loss and pre-expiry margins will apply under the prescribed risk management framework.

Significance for India's Energy Market

The launch marks NSE's entry into domestically benchmarked energy derivatives and is expected to provide market participants with a new instrument to manage price risk in India's natural gas market. (ANI)

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