The National Commodity and Derivative Exchange has launched International Brent Crude Oil and Light Sweet Crude Oil futures contracts which will be free of currency fluctuation.
The exchange rate of the currency will be locked in at the launch date of the contract and it will be applicable for the entire tenure of the contract. The final settlement price, anchored to crude contracts of the Intercontinental Exchange (of US), will be based on the currency exchange rate fixed at the contract launch.
The intention matching contract attempts to integrate international price discovery markets with the Indian futures market and eliminate currency distortion to provide a simple and perfect hedge option to domestic companies and value chain participants.
Since contract prices will move in tandem with international prices, the final settlement price will be simple and transparent, said Ncdex in a press statement on Friday.
Samir Shah, Managing Director, Ncdex, said the contract is ideal for small consumers and hedgers who cannot hedge in the Indian commodity market on account of the huge movement in NDF (non-deliverable forward) markets in the evening, which does not reflect the true picture of underlying.
“This unique contract would help oil companies hedge their price risk without distortions created by currency fluctuations. We are, therefore, expecting healthy participation from physical market players,” he said.