NSE gets Sebi nod to launch electricity derivatives

Mint

a day ago

The National Stock Exchange of India (NSE) has received approval from the markets regulator to launch monthly electricity derivatives contracts, said the exchange in a filing.
Plans are underway to gradually introduce contracts for difference (CFDs) and other long-duration electricity derivatives such as quarterly and annual contracts, subject to regulatory approvals, Ashishkumar Chauhan, NSE managind director (MD) and chief executive officer (CEO), said.
The filing said that the launch of monthly electricity futures will provide market participants with effective hedging tools against electricity price volatility, enable more accurate price signals in the power sector, and encourage capital investments across the electricity value chain—generation, transmission, distribution, and retail.
Electricity derivatives gain prominence as India's journey toward achieving its net-zero emissions target demands substantial investment, estimated at over $250 billion annually until 2047, according to a Niti Aayog report.
'By 2030, renewable energy sources such as solar and wind are expected to contribute over 50% of the nation's installed power capacity. A robust and dynamic electricity derivatives market is essential to attract this scale of climate finance from both domestic and global investors,' the release said.
'A calibrated and phased approach will ensure both market integrity and investor confidence. It is crucial for the spot and futures electricity markets to evolve in tandem to create a virtuous cycle of liquidity and stability. A financially settled futures market will allow participants to hedge their risks effectively, while a robust day-ahead spot market will ensure reliable price discovery,' Chauhan said.
'Our strong understanding of both spot and derivatives markets uniquely positions us to build an integrated and liquid electricity derivatives market,' NSE said in the release.
Recently, the Multi Commodity Exchange of India (MCX) also received approval from the Securities and Exchange Board of India (Sebi) to launch electricity derivatives.
MCX's shares had risen over 5% and reached a record high of ₹ 7,820 on the BSE after the exchange obtained regulatory clearance to introduce electricity derivatives on 9 June.