Curb manipulation in commodities market: Jaitley to Sebi

Expresses confidence that NSEL-like problems would be dealt with effectively

With commodity derivatives coming under Sebi's jurisdiction, Finance Minister Arun Jaitley today said the regulator must ensure that manipulative activities are curbed in this market and expressed confidence that NSEL-like problems would be dealt with effectively.

Jaitley, who formalised the merger of Forward Markets Commission (FMC) with the Securities and Exchange Board of India (Sebi) by ringing the customary bell, said that the amalgamation will bring convergence of regulations in the commodities and equity derivatives markets.

"The merger will increase the economies of scope and scale as there are strong commonalities between all kinds of trading. I am sure that Sebi is prepared to regulate the commodity derivatives market," he said.

"It would be a challenge for Sebi because this is an additional responsibility, but Sebi has matured over the last two decades to take on (such responsibilities," Jaitley said.

To a question on the emergence of NSEL-like crisis situations, Jaitley said, "You always have aberrations in a free market... if such incidents do occur, I'm sure we have strong regulatory mechanisms to deal with it."

A massive Rs 5,700-crore payment crisis at National Spot Exchange Limited (NSEL) was one of the key triggers for the merger of FMC with Sebi, although proposals in this regard have been in place for 12 years now.

Jaitley said, "As this underlying physical market is widespread, fragmented and unregulated for certain commodities, Sebi needs to have a proper mechanism to capture any aberrations in the physical market that would disrupt the derivatives market."

He said that markets thrive where there is confidence and integrity and this requires transparency and good regulations.

"Farmers, producers and consumers need to have confidence that derivatives market is free from manipulations and market abuses. I am sure that Sebi would be successfully able to handle the additional responsibility entrusted to them," the Finance Minister said.