Sebi to soon allow MFS to trade in commodities

IN TALKS TO INCLUDE BANKS, FPIS

THE SECURITIES and Exchange Board of India (Sebi) is pushing for more institutional participation inthecommoditymarkets.while the Sebi is likely to give mutual funds the go-ahead to trade in commodity markets in a month, it's also in talks with the RBI to allow institutional investors like banks and FPIS to trade in the segment, Sebi chairman UK Sinha indicated on Friday.

"MFS' participation in commoditiesderivativeswouldbethe first one to happen among institutionalinvestors,"sinhasaid.this decision is likely to be implemented in a month. Sinha's term as chairman will end on March 1.

On allowing participation of banks, alternative investment funds and foreign portfolio investors (FPIS) in commodities, he said Sebi is in consultation with the RBI. "Our argument with RBI has been, in any case banks have huge exposure to commodities through the lending programme. Wehavebeenaskingthemtodisclose that. Let a beginning be madebythecorporatesindisclosingthatandthenyouyourselfdiscover there is a need to allow them to hedge also," Sinha said.

"Weareatanearlystage...and partofthereasonishowcomfortable the RBI is about the financial health of the bank, so they will also have this as a concern when they take a call," he said.

Sinha also said Sebi is seeking legal clarity with respect to options trading in commodities which may require amendments to the Securities Contracts Regulationsactandisalsointalks with the finance ministry on the issue. Sebi had last year allowed options trading on exchanges, a demand of market participants.