SEBI LISTS CRITERIA FOR COMMODITIES

The Securities and Exchange Board of India (Sebi) has listed out a slew of eligibility criteria for the inclusion, retention and exclusion of any commodity in the exchange traded futures market.

Sebi noted that commodities in which the government mandates the minimum or maximum price or in which certain acts like the Food Control Regulation Act (FCRA) and Essential Commodities Act among others apply might be less conducive for derivatives markets.

It has asked the commodity exchanges to look at other parameters like size of the market, standardisation and durability of the product, global presence, geographical reach, seasonality and price volatility before including or excluding a commodity in derivative market trading as these factors are likely to influence the efficient price discovery mechanism.

Commodity exchanges have also been directed to apply these parameters on each of the commodities presently being traded on the exchange platforms to determine their eligibility for future trading.

The latest set of direction is based on the recommendation of the Commodity Derivatives Advisory Committee (CDAC) constituted for advising Sebi on matters concerning effective regulation and development of the commodity derivatives market.

“Though it may not be practicable to keep strict objective criteria which may be uniformly applied across all commodities for inclusion under derivatives, a broad framework can certainly be laid down,” the regulator said.