Another turf war, this time with FMC

The Securities and Exchange Board of India (Sebi) may be heading for a fresh battle, this time with the Forward Markets Commission.

On Monday, the National Stock Exchange issued a circular, with Sebi's approval, on the futures and options trading in gold-based exchange traded funds (ETFs). This has prompted the FMC, which is the commodities futures regulator, to take up the issue with the Union government.

“Anything that has to do with commodities falls under (the purview of) Forward Contracts Regulation Act and should be regulated by us,” FMC Chairman B C Khatua said.

He refused to comment on approaching the government over the NSE circular.

Options trading in commodities is banned under the law. If options trading in ETFs is allowed, market players may circumvent the rules, sources said. They also pointed out that the law ministry was against the move.

“When FMC did not object to ETFs based on gold, it should not have any problems with derivatives based on it,” a Sebi official said.

However, the sources said that Sebi’s approval came as a surprise as FMC had taken up the issue of fund houses launching ETFs based on oil and silver. Following this, the proposed ETFs were not launched.