India and universal exchanges

India has perhaps as an exception not followed global norms and has permitted universal exchanges. As of now, it is an in-principle decision and terming commodity exchanges as stock exchanges was a first step in that direction.

India has one regulator for commodities and equities for the past two years. The law recognises all exchanges, whether in commodity derivatives or equities, as stock exchanges. Brokers are given universal licences, which means they don’t have to have a separate company for trading in a commodity and a separate one for equities. In such a scenario, allowing all exchanges to offer all segments is seen as logical.

The Dubai-based DGCX trade all segments under one roof and these are comparable with India's IFSC-based exchanges, catering to international financial centres.

Russia, South Korea and Australia have one exchange to trade in all asset classes but there the share of commodities in total revenues of the exchange is insignificant.

The US has separate regulators for equities and another for all derivatives (including in equities, commodities and forex) but exchanges where these commodities are traded are different and equity and commodity are not on any single exchange.

Bigger exchanges like the CME and LME are equally giving deliveries of commodities; in India, metals and energy products are cash-settled and settlement prices are derived from those global exchanges.

The regulator has raised the issue of higher deliveries on derivative commodity exchanges in recent weeks.