India’s Commodity Derivatives Market: A Retrospective and Forward Outlook

Abstract

This paper discusses the development of commodity derivatives trading in India over decades. It examines important changes in the law and regulation that have impacted the development of the commodity derivative market. The aim is to provide an in-depth understanding of the historical development, the current state of the Indian commodity derivatives market, and its prospects for the future. Though helpful information has been provided by extant literature, limited study has been performed concerning the recent developments that have taken place in commodity trading in India. A more in-depth analysis of commodities futures trading in India would thus serve to fill these gaps for this study. The changes brought about in commodity trading by the establishment of MCX and NCDEX had given plenty of opportunities. However, entry barriers and regulations are still in place, which creates an overarching need to maintain development in efficiency and transparency. Some of the major observations made here include increased volumes of options traded, the impact of regulations on trade, and the diversification of stock exchanges into commodities.