Sebi Keen to Deepen Com­mod­ity Mar­kets, Seeks Bro­kers’ In­puts

The Economic Times - - Markets: Beating Volatility - Ram. Sahgal@ times­group.com

Mum­bai: In­te­gra­tion of the com­mod­ity and equity bro­ker­age arms, con­straints on hedg­ing, new prod­ucts launch and mar­ket mak­ing in illiq­uid con­tracts were is­sues mar­ket reg­u­la­tor Se­cu­ri­ties and Ex­change Board of In­dia (Sebi) dis­cussed with com­mod­ity broking firms and of­fi­cials from big hedgers like ITC, Ti­tan and Louis Drey­fus, said two per­sons aware of the go­ings-on. “The Sebi chair­man was present at the meet­ing,” said one of the per­sons. “While no timeline was given, Sebi, which is com­mit­ted to ush­er­ing in re­forms into the 13-year old com­mod­ity fu­tures mar­ket, seeks feed­back from all the stake­hold­ers.”

Cur­rently, most equity bro­kers have set up wholly-owned sub­sidiaries which al­low traders and in­vestors ac­cess to bourses like MCX and NCDEX. In course of time, Sebi would al­low bro­kers to merge the com­mod­ity sub­sidiary with the par­ent, al­low­ing com­modi­ties and eq­ui­ties to be of­fered un­der a sin­gle um­brella in due course. Now, an in­vestor wish­ing to trade com­mod­ity fu­tures has to open a sep­a­rate trad­ing ac­count from his equity and de­mat trad­ing ac­count. Hedgers on com­mod­ity ex­changes spelt out the con­straints faced in us­ing plat­forms of­fered by me­tals and en­ergy bourse MCX and farm bourse NCDEX.

They said po­si­tion lim­its in the near month at 25% of over­all ex­po­sure limit was "too lit­tle" and also that mid and far months were dogged by low liq­uid­ity. “Their feed­back was sought on how to deepen the mar­ket and en­cour­age more hedg­ing.”

Also, aside from gold, sil­ver, base me­tals and en­ergy, and farm prod­ucts like edi­ble oils and chana, many con­tracts were illiq­uid. Bro­kers asked whether mar­ket mak­ing could be al­lowed to in­crease depth of the mar­ket. On new prod­ucts, Sebi sought views and feed­back from bro­kers on the type of prod­ucts – op­tions or in­dices – to be in­tro­duced and on their prospec­tive con­tract de­sign.

Sebi chair­man UK Sinha

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