No FPI investment in commodities till govt review: RBI to Sebi

There were hopes Sebi-FMC merger would pave way FPIs to invest in commodity derivatives, as they are already allowed in capital markets

Hopes of attracting FPI investments in commodities after their coming under Sebi's ambit later this month have been dashed by RBI, which has told the market regulator to keep any such decision on hold, till a policy review is done by the government in this regard.

While the government has issued notifications for merger of commodities markets regulator FMC with capital markets watchdog Sebi with effect from September 28, the revised norms for exchanges and various market participants were notified last month to pave way for the combined regulatory regime.

There were expectations that the merger would pave way for the foreign portfolio investors (FPIs) to participate in the commodities derivatives market, as they are already allowed by Sebi in the capital markets segment under its ambit.

Sources said Sebi had written to the Reserve Bank and the government in this regard, and RBI has replied that the status quo should be maintained till a policy review is undertaken by the government for allowing FPIs in the commodities derivative trading.

Ahead of FMC merger with itself, Sebi has also amended its norms that would allow functioning of the commodities derivatives market and its brokers under the ambit of the capital market regulator.

The amended regulations include those related to stock exchanges and clearing corporations. These new norms will also come into force on September 28, the date from which Sebi will begin regulating the commodity derivatives market as a unified regulator.

Among others, a regional commodity derivatives exchange should pay to Sebi an annual regulatory fee of Rs 50,000 within 30 days of conclusion of the relevant financial year, according to the amended norms.

In the case of national commodity derivatives exchanges, the net worth for a self clearing member should be Rs 1 crore and for a clearing member, the same should be Rs 3 crore.

The deposit amount in the case of national commodity derivative exchange would be Rs 50 lakh for both self-clearing and clearing members.

With regard to regional commodity derivatives exchanges, the net worth level and deposit amount for self-clearing and clearing members would be specified by Sebi from time to time.

Sebi board last month approved new norms for commodities derivatives market under which exchanges and brokers in this segment would need to comply with rules applicable to their stock market peers.