Description

BSE announces contract specifications and launch calendar for Brent Crude Oil Options on Futures, detailing trading parameters, margin requirements, and settlement mechanisms.

Summary

BSE has issued the further launch calendar and contract specifications for Brent Crude Oil Options on Futures (symbol: BRCRUDE). These are European-style Call and Put options with BSE Brent Crude Oil Futures contracts (100 barrels) as the underlying. The circular details trading parameters, strike structures, margin computation methodology, and settlement procedures.

Key Points

  • Symbol: BRCRUDE — European Call & Put Options on Brent Crude Oil Futures
  • Trading Hours: Monday to Friday, 9:00 a.m. to 11:30/11:55 p.m. (timing varies with US daylight saving time)
  • Trading Unit: One BSE Brent Crude Oil futures contract (100 barrels)
  • Strike Price Interval: Rs. 50, with 51 CE and 51 PE strikes (25 ITM, 25 OTM, 1 ATM)
  • Tick Size: Rs. 0.10
  • Underlying Quote: Rs. per barrel, Ex-Mumbai (excluding taxes and levies)
  • Contract Start: Next business day immediately after expiry of near-month futures
  • Expiry (Last Trading Day): Two business days prior to expiry of underlying futures contract

Regulatory Changes

  • Margin framework references SEBI Circular SEBI/HO/CDMRD/DRMP/CIR/P/2020/15 dated January 27, 2020 for Short Option Minimum Margin (SOMM) and Margin Period of Risk (MPOR)
  • Daily Price Limit determined using Black-76 option pricing model with statistical methods; may be relaxed considering underlying futures movement or volatility

Compliance Requirements

  • Members must comply with SPAN-based margin computation for client portfolios covering both futures and options positions
  • Premium for option buyers must be blocked upfront on a real-time basis
  • Margins recomputed using SPAN at multiple intraday intervals: Begin of Day, 10:30 am, 12:30 pm, 1:30 pm, 3:00 pm, 5:00 pm, 7:00 pm, 8:30 pm, 10:30 pm, and End of Day
  • Initial Margin: SPAN-based at individual client portfolio level
  • Extreme Loss Margin: Minimum 1% (applicable only on short option positions)
  • Members should monitor ICCL circulars for applicable Volatility Scan Range (VSR), SOMM, MPOR, and Additional Margin updates

Important Dates

  • Contracts available as per the Contract Launch Calendar issued by BSE
  • Contract start day: Next business day after expiry of near-month futures
  • Expiry: Two business days prior to expiry of the underlying Brent Crude Oil futures contract
  • Pre-expiry sensitivity reports provided to members at least 2 days in advance of impending margin increases

Impact Assessment

This circular expands BSE’s commodity derivatives offering by introducing options on Brent Crude Oil futures, providing market participants with additional hedging and trading instruments. The European-style option structure limits exercise to expiry, reducing early assignment risk. The SPAN-based margining with intraday recomputation ensures robust risk management. Commodity traders, hedgers exposed to crude oil price risk, and derivatives members are directly impacted. Mark-to-market gains/losses on options are not settled in cash, which affects liquidity planning for members carrying options positions.

Impact Justification

Introduces new derivative contracts (Brent Crude Oil Options on Futures) with detailed specifications; relevant to commodity traders and members but limited to a specific instrument segment.