Sebi to pave way for foreign participation in commodity derivatives

Sebi board meet to discuss integration with commodities regulator, listing norms for start-ups and e-IPOs

The Securities and Exchange Board of India (Sebi) is working on a framework to facilitate foreign portfolio investor (FPI) participation in the commodities market. The investment of FPIs in commodity derivatives is being facilitated, as the Finance Bill cleared by the Lok Sabha in the recently concluded session included commodity derivatives in the definition of securities.

“The definition of securities under the Sebi Act has been amended to include commodity derivatives as well, that automatically allows FPIs to trade in them,” said a source.

The only concern could be raised is by the Reserve Bank of India (RBI) but sources indicate that RBI has already given an in-principle go ahead to the proposal.

NEW INITIATIVE

• The investment of FPIs in commodity derivatives is being facilitated, as the Finance Bill included commodity derivatives in the definition of securities
• The only concern could be raised is by RBI but sources indicate the central bank has already given an in-principle go ahead to the proposal

“If RBI has a concern then they can issue a circular stating otherwise but there may not be one,” said the source.

People privy to the matter indicate that Sebi in the board meeting on Tuesday would discuss the road map for the merger of Forward Markets Commission (FMC), slated for September this year that will kick start a series a reforms for the commodity and securities markets.

The Sebi board is also likely to finalise the norms for for start-up listing where the ticket size of investment could be Rs 5 lakh. The platform would allow investments only by private equity, venture capital investor and the trading in start-ups would be on a separate platform.

The regulator is likely to reduce the minimum application size to halve to Rs 5 lakh from the proposed Rs 10 lakh. Additionally, even the minimum trading lot size could be reduced to Rs 3 lakh from the existing Rs 5 lakh.

The disclosure requirement would not require start-ups to disclose objects of issue if money raised for gross commercial purposes. Basis of issue prize would require disclosures as deemed fit by the issuer, disclosure of litigation depending on its materiality.

“The regulator has collected and analyzed all the public comments and some of them have been accepted by the board,” said a source close to the developments.

These aspects were deliberated upon in the recently conducted meeting of the Primary Market Advisory Committee (PMAC).

The board would also finalise the e-IPO norms that would halve the listing time.

In May last year, a five-member committee had said high-cost transactions in commodity futures caused a hindrance to the commodities market. And, suggested this could be reduced if banks and FIIs were allowed to participate in the commodity markets.