MFs may be allowed to invest in commodity derivatives soon

To increase the institutional participation in the commodity segment, Sebi on Thursday said it will soon finalise the guidelines to allow mutual funds (MFs) to invest in commodity derivatives segment.

The markets regulator said it will also frame warehousing norms for non-agriculture commodities and will consider allowing 'indices' once its robustness is established by the bourses. Addressing an Assocham event here, head of Commodity Derivatives Market Regulation Department (CDMRD) in Sebi, P K Bindlish said the commodity derivatives market is still faced with challenges even though the trading volumes have risen up to Rs 100 lakh crore. To increase participation, Sebi is now moving towards allowing mutual funds. "We are working on finalising the guidelines at the earliest," he said. On allowing more products, he said 'indices' will be considered after knowing its robustness.

The 'option' trading in commodity derivatives market has already been allowed with MCX launching it in five commodities and NCDEX in one commodity. "More commodities will be considered after seeing their success," he said. To strengthen warehousing, the regulator will soon come out with warehousing norms for non-agri commodities also, he said.

"Warehousing Development and Regulatory Authority (WDRA) has done a good job for agri commodities. But for non-agri, there is no regulation and guidelines from WDRA. We will come out with norms soon," he added. Emphasising on the need to have a strong settlement mechanism, the Sebi official further said the exchanges have been asked to put in place their trading corporation for settlement purpose from October.

"At present, the settlement is done by exchanges themselves. World over, it is done by trading corporation. I am happy to share that already one of the exchanges has made a proposal for a trading corporation and I think they will be getting soon. The other exchanges are in the process," he said.