Sebi to register commodity brokers from August

The Securities and Exchange Board of India (Sebi) is likely to start registration of commodity brokers from August, coinciding with completion of the guidelines for merging the Forward Markets Commission (FMC) with itself.

On Tuesday, it said it was preparing its own regulations for commodities derivatives, to be ready by end-August, and to be ready for regulating commodity exchanges (comexes) by September.

Commodity brokers are awaiting the final guidelines with regard to changes made from the existing ones, governed by FMC. The latter has no powers to regulate brokers directly; they are regulated through comexes. Sebi will register brokers and charge fees for this.

“We held two rounds of meetings (on June 4 and 17) with Sebi officials. We got the indications that the registration of brokers will start around August 1 and the the process will be completed by September 30,” said B K Sabharwal, national president of the Commodities Participants Association of India (CPAI) and promoter of ISF Commodities.

HOW IT PLAYS OUT

• Commodities brokers at present are regulated through exchanges and not registered with FMC
   
• Stock brokers pay Rs 1 lakh as registration fees to Sebi
   
• All entities active in commodity derivatives including brokers, commodity exchanges and other intermediaries like warehouses, will have to get themselves registered with the Sebi
  

 

More than procedure, brokers have to comply with Sebi regulations which are stringent compared to what they now follow
 

Sebi fees for currency segment brokers have been relaxed. Commodities brokers also want relief from fees

Sebi is yet to decide on the fee structure for commodity brokers. Currently, they pay none. “We will try to convince Sebi not to charge registration fees from commodity brokers,” said Sabharwal.

CPAI will urge automatic registration of commodity members. Clearing agents and warehouse service providers might also have to get registered with Sebi and pay a one-time fee, registration being renewable yearly.

“The government included commodities in the definition of securities in the Securities and Contract Regulation Act. Thus, instead of taking multiple clearances from different places, all issues were sorted in one stroke. Sebi is taking a nominal registration fee from currency brokers. Similarly, the regulator can waive registration fee for commodities,” said Sudip Bandopadhyay, managing director, Destimoney Securities.

A brokerage official, involved in dialogue with Sebi, said: “We are waiting for the government notification announcing merger of FMC with Sebi and its effective date.” The merger was announced by Finance Minister Arun Jaitley in the Union Budget proposals this February, setting a one-year deadline. A few weeks later, Parliament approved the merger framework, under which the existing securities market guidelines would apply to the commodities markets, too.

Meanwhile, a senior Sebi official said that the regulator, post-merger, would look to broad base quality specification of agri commodities to align them with commodities available in the market.