Sebi, FinMin draw road map for commodity mkt

Securities and Exchange Board of India (Sebi) Chairman U K Sinha on Tuesday met finance ministry officials and discussed measures to strengthen the commodity market, said sources in the know. Sebi told the ministry its priority was to bring the commodities derivatives market at par with the securities market. The regulator intends to introduce new products and categories, including options trading, to ensure more liquidity and better price discovery.

Securities and Exchange Board of India (Sebi) Chairman UK Sinha on Tuesday met finance ministry officials and discussed measures to strengthen the commodity market, said sources in the know.

Sebi told the ministry its priority was to bring the commodities derivatives market at par with the securities market. The regulator intends to introduce new products and categories, including options trading, to ensure more liquidity and better price discovery.

Commodity derivatives came under Sebi’s purview on September 28, 2015, following the merger of the erstwhile commodity regulator Forward Markets Commission (FMC) with it.

Introduction of commodity options was uppermost on the agenda and might be approved in principle by Sebi later in this week, said the person cited above. Initially, one farm and nonfarm commodity will introduce options. Accordingly, exchanges would be asked to submit a roadmap, the person added.

Sebi will review the technology and the infrastructure required, and the settlement processes for options trading. In India, commodity futures also have a delivery settlement. Sebi is likely to decide on this soon.

Sebi may also allow a single licence for equity and commodity brokers. The issue was taken up with ministry officials on Tuesday. Allowing banks, mutual funds and alternative investment funds in the commodity futures market may also receive Sebi approval.

Finance ministry officials were briefed on the steps taken by Sebi i the commodities market in the past year. "Challenges emanate from underlying markets, which are fragmented, dispersed and not under our regulatory purview,” Sinha had said in Sebi’s annual report for 2015-16.

The Sebi-FMC merger was triggered by the ~5,600 crore National Spot Exchange Ltd (NSEL) crisis in 2013. A fraud perpetrated on a commodity exchange had challenged the earlier regulatory framework.