NSE's Introduction of WTI Crude Oil and Gas Futures

• The NSE's decision to introduce Rupee-denominated futures contracts based on NYMEX WTI crude oil and natural gas is aimed at diversifying its energy basket and enriching the overall commodity segment.
• With the addition of these new contracts, a comprehensive range of crucial energy products will be available on a single platform.
• The new contracts are expected to provide market participants with more effective trading and hedging opportunities.
• The underlying commodity of the NYMEX oil futures contract is WTI.
• In the commodity derivative space, crude oil derivatives (Brent and WTI) are among the most traded products.
• Foreign Portfolio Investors (FPIs), including individual investors, family offices, and corporate FPIs, are permitted to trade in these new commodity derivatives products.
• The Multi Commodity Exchange (MCX) offers similar contracts on its platform. By introducing WTI crude oil and natural gas futures, the NSE aims to broaden its product portfolio and draw liquidity from the MCX.
• To encourage investors to shift to the NSE, the specifications of the new contracts will be identical to those of the MCX.
• The NSE aims to attract investments from Foreign Portfolio Investors (FPIs) and high-net-worth individuals who already trade in equity derivative segments.
• Despite SEBI's previous attempts to draw foreign investors to the non-agricultural commodity segment by relaxing norms, the success was limited.
• If the NSE succeeds in attracting investments in new products, it will also enhance liquidity in other traded commodities.
• Prior to this, the NSE had entered into a data licensing agreement with the CME Group. This agreement allowed the NSE to list, trade, and settle rupee-denominated NYMEX WTI Crude Oil and Natural Gas derivatives contracts on its platform.