Sebi chief bats for deeper commodity markets

With an aim to further deepen the commodity derivatives market, regulator Sebi will explore ways to widen the segment by bringing in more participants and products.
The Securities and Exchange Board of India (Sebi) started regulating the commodity market in September 2015 following the merger of the erstwhile watchdog Forward Markets Commission (FMC) with itself.
"Developing the commodity derivatives market is one of Sebi's main agenda. Sebi will take necessary measures for integration and harmonious development of the commodity derivatives market with securities and will explore widening its participants and products to further deepen the the segment," Sebi Chairman Ajay Tyagi said in a message in its annual report.

He further said the securities market is dynamic and its regulatory framework needs to evolve in tandem with this.
"Sebi will continue to rationalise the regulatory framework to make it contemporary and user friendly, without compromising on its overarching objective of investor protection," he added.
Last month, Sebi issued detailed guidelines on option trading. It allowed options trading in commodities to deepen the market, but permitted each exchange to launch options on futures of only one commodity initially.

Putting in place strict eligibility criteria, Sebi had said options could be launched on futures contract of only those commodities that are among the top five in terms of total trading turnover value of previous 12 months.

Besides, the average daily turnover of underlying futures contracts of such a commodity in past one year should be at least Rs 200 crore for agricultural and agri-processed commodities, and Rs 1,000 crore for other commodities.
While Sebi had agreed to permit options trading last year itself, some legal requirements were holding back the move.
After hectic discussions, Sebi finally decided to allow options trading on futures contract of commodities rather than any commodity directly being allowed as an underlying security.
In market parlance, options contract is a derivative product that provides an investor the right to purchase, without any obligation to buy at the specified price or date.

On the other hand, futures contract refers to purchase or sale of a particular commodity or any other financial instrument at a pre-determined price at a specified time in future.