India's largest commodity exchange, Multi Commodity Exchange, plans to launch gold options ahead of Diwali between October 5 and 14, after getting approval from the market regulator last month.
“We are working for a launch after Dussehra and pre-Diwali,” said Mrugank Paranjpe, managing director at MCX Ltd.
The new product will face a challenge because of the commodities transaction tax regime. This may prevent wider acceptance.
It starts as an options contract and would devolve into a futures contract once exercised. The CTT charged at the time of exercise could wipe out gains. Traders would prefer to use the options part and square-off ahead of the expiry.
“The regulators are well aware of the taxation for this product, however there is no change in taxation for this product. There will be exercise related STT (securities transaction tax) or CTT on the options that will be applied”, said Paranjpe.
Traders that BloombergQuint spoke to said they would prefer to use the option part and square-off ahead of expiry of option.
“It may result in some people wanting to square-off, but I think for a product we are starting this could be one of the aspect and may not be the only thing we should be worried about,” said Paranjpe
The commodity exchange has conducted road shows to push gold options. “We have been meeting members and have reached out to over 5,000 jewellers,” he added.
Also Read: India Allows MCX to Start Trading First Options Contract in Gold
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