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Sebi permission for mutual funds, PMS in commodity derivatives soon

Product basket for options, delivery-based non-agri contracts also on cards

Rajesh Bhayani  |  Mumbai 

SEBI
Photo: Reuters

The new managing director and chief executive officer of the National Commodity and Derivatives Exchange (NCDEX), Vijay Kumar, has assumed office at a time when the commodities market is set to enter a phase of heightened activity.

Two weeks after his taking over, Finance Minister presented the Budget, in which he stressed the importance of commodity and and developing an institutional mechanism for farmers to benefit from them and warehousing.

The has developed good connections with farmer organisations and made them hedge on its platform.

The Securities and Exchange Board of India (Sebi) is taking measures to develop following the Budget announcement and some are underway. has finalised norms for allowing and portfolio management services in and will soon announce them. It issued a discussion paper in the first week of December last year on this.

has cleared a universal exchange, which means the domains of equity and commodity exchanges will overlap. Before that, is keen to expand product baskets and the range of participants in the market. This process will start in October.

Some indications on this were given by Jaitley in his Budget speech, in which he said: “For better price realisation, farmers need to make decisions based on prices likely to be available after its harvest. (The) Government will create an institutional mechanism, with participation of all concerned Ministries, to develop appropriate policies and practices for price and demand forecast, use of and market, expansion of warehouse depository system and to take decisions about specific exports and imports related measures.”

This has enthused commodity exchanges’ executives because while Jaitley mentioned this in connection with farm produce, the infrastructure he proposed will be equally appropriate for all non-farm contracts in which deliveries are done as in the case of and silver, and also for delivery-based metal contracts, which the Multi Commodity Exchange (MCX) and have proposed to

Commodity and are important for hedging. Vijay Kumar said, “ One of the reasons for the ballooning of non-performing assets of commodity companies is a lack of hedging of commodity exposures. Hence there is enormous scope for improving hedging on the exchange platform.”

An industry official said, “While the FM’s stress is on farm commodities, we feel will look at allowing more futures, and approve in more commodities.”

An spokesperson said, “Standardising norms in and the expected permission for larger institutional participation through and portfolio management services can be seen as a strong and positive message from the regulator. The recent announcements can also be read as an assurance to players, especially newer players such as institutions and bank broking subsidiaries, given that the number of participants is set to increase in this market. There will not be any abrupt disruptions or withdrawals in the policy approach towards the market.”

Sources in collateral management say the government is pushing for expanding the warehouse repository framework. There are two repositories functioning and one has started issuing electronic warehouse receipts, which are negotiable.

First Published: Thu, February 08 2018. 00:54 IST
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