Commodity exchanges get 1-year to rationalise salaries

Will have to eventually follow all the regulations applicable to the stock exchanges, but Sebi has decided to give them some time to ensure compliance

Commodity exchanges will have to rationalise salaries of their key management personnel within a year as per Sebi norms, while they have been given six months to put in place 'Chinese walls' to segregate regulatory functions from other departments.

While Sebi (Securities and Exchange Board of India) is the overall watchdog for capital markets, the stock exchanges typically act as front-line regulators. After coming under Sebi's regulatory ambit from September 28, the commodity bourses will have to carry roles similar to stock exchanges.

The commodity exchanges would have to eventually follow all the regulations applicable to the stock exchanges, but Sebi has decided to give them some time to ensure compliance.

The policy for administrative and governance issues of stock exchanges has been laid down in Sebi's Stock Exchanges and Clearing Corporations (SECC) Regulations, 2012.

Gearing up to merge commodities markets regulator FMC with itself, Sebi has laid down clear timelines for compliance to various regulations by the exchanges and other entities in the commodity marketplace.

As part of this exercise, Sebi has decided that the national commodity derivatives exchanges will be given one year's time to comply with its compensation policy for key management personnel. The timeline for regional commodity derivatives exchanges would be co-terminus with the deadline for their corporatization and demutualization.

With regard to the segregation of regulatory departments, Sebi has decided to allow commodity derivatives exchanges six months to comply with this requirement.

In terms of SECC Regulations 2012, stock exchanges need to adopt a 'Chinese Wall' policy which separates their regulatory departments from other departments.

The employees in the regulatory department can not communicate any information concerning regulatory activity to any one in another department.

"The employees in regulatory areas may be physically segregated from employees in other departments including with respect to access controls. In exceptional circumstances employees from other departments may be given confidential information on 'need to know' basis, under intimation to the Compliance Officer," as per Sebi norms.

However, there was no requirement by FMC for segregating regulatory departments of commodity exchanges from other departments and therefore Sebi has decided to fill this gap.

Commodity exchanges will also have to set up oversight committees for member regulation and for trading and surveillance function within 3 months of Sebi-FMC merger.

For constituting advisory committees, the national commodity derivatives exchanges will get one year.