IP Protection To Exchanges Will Ensure Success Of New Products: Sanjit Prasad, CEO, ICEX
Commodity exchange ICEX is set to add yet another "first" to its credit. After launching the world's first-ever diamond derivatives contracts last August, the exchange has recently been given in-principle approval by the Ministry of Petroleum and Natural Gas to launch India's first petrol and diesel derivatives. The exchange is currently awaiting SEBI's approval for making the product live.
In an interview with BW Businessworld, Mr. Sanjit Prasad, CEO, ICEX, revealed the benefits of the new product to the users of oil and petroleum and also discussed the need of providing IP-protection to new exchanges in order to enable exchanges gain critical mass in case of new product launch and sustain themselves against intense competition from established exchanges.
Excerpts:
When are you going live with petroleum derivatives and what would be the benefits?
In May-end, we received the "No-Objection" from the Ministry of Petroleum and Natural Gas (MoPNG) for launching petrol and diesel futures. We are now awaiting the final clearance from market regulator SEBI, which we also expect to come soon. As for the benefits, like any insurance product, the petrol and oil future contracts would enable bulk users to minimise their risks out of fluctuating oil prices by hedging in these futures contracts.
Do you think the new product would be successful when most commodity products have failed in India?
For any commodity exchange, it takes huge resources, both in terms of manpower and investment, to design a new contract. We too have put in months of extensive research, survey, groundwork and developing the necessary ecosystem network before introducing the oil and petrol product to the market. We have always followed this practice for designing any new commodity futures product. Having said this, one must also understand that without adequate regulatory support to new exchanges and to new products, ensuring success of a commodity futures product becomes difficult, if not impossible.
What exactly are you asking from the regulator?
Ability to create critical mass in volumes and open interest for a new futures contract is the key for any new exchange to find its foothold among stronger and incumbent exchanges. Designing a new futures contract and a new derivatives market is no less an invention and hence like all unique inventions, should also invite intellectual property (IP) rights. We have written to SEBI about allowing IP protection and exclusivity till the time critical mass is achieved in a new product segment. After exclusivity period is over, other exchanges could be allowed to run similar or a variant contract of the commodity.
What are the other product launches that you are planning for this year?
We are working on slew new products, but till the regulatory approvals come through, we would be able to shed more light on these launches.
How has been the market response for Diamond Futures?
It's been a highly encouraging journey for ICEX Diamond Futures. There has been a steady month-on-month increase in participation, turnover and open interest since we commenced operations in August 2017. The average daily open interest on ICEX diamond derivatives segment increased by more than 263.76 percent from 139.49 carats in the first month (Aug 28-Sept 29, 2017), to 453.97 carats in the recent month between June 05-July 05, 2018. At present the total open interest in Diamond at ICEX is 1,12,163.9 carats. Average Daily turnover has also increased from Rs 6 crores in Aug 28-Sept 29, 2017 to Rs 19.35 crores from June 05-July 05, 2018.
