NSE On Track To Launch Electricity Derivatives, Receives In-Principle Approval From SEBI
The proposed contracts are likely to be of shorter tenures such as monthly or half-yearly, in line with the regulator’s preference.
The National Stock Exchange of India has received in-principle approval from SEBI to introduce electricity derivatives, and it is in the early stages of developing this new product.
During its earnings call on Wednesday, NSE’s management confirmed that the structure and specific terms of these contracts are still under discussion with the regulator. Capacity building for market participants and internal systems is also underway as the product gradually takes shape.
The proposed contracts are likely to be of shorter tenures such as monthly or half-yearly, in line with the regulator’s preference. This approach differs from some global markets, where yearly electricity derivative contracts are more common.
NSE management clarified that the product will be settled on a platform regulated by SEBI. This would make it differ from spot electricity markets operated by exchanges like IEX, which are not under SEBI's jurisdiction.
The management said that power derivatives represent one of the largest commodities markets globally, and once introduced in India, they will allow power buyers, sellers, and producers to hedge their price risks more effectively.
NSE is also on its way to a major expansion of its co-location infrastructure. Responding to a question on the call, the management said the exchange has been receiving steady applications from entities seeking co-location rack space, leading to a backlog.
To address this, NSE will add 300 new racks by the first quarter of fiscal 2026, which will ease much of the waiting list, though it may take a few additional months to clear the entire backlog.
To cater to longer-term demand, NSE is planning to expand its co-location facility by 2,000 racks over a phased period. The total cost for adding these 2,000 racks is estimated at Rs 520–550 crore.
