Sebi to discuss commodity market norms

Ready to merge commodity trading regulator FMC with itself, capital markets watchdog Sebi will discuss tomorrow a new set of norms and finer details for its regulation of commodities derivatives market.
Sebi expects to complete the merger next month while its Chairman U K Sinha had recently cautioned small investors against coming for quick gains through speculation in the commodities market, saying it is "risky" and requires a lot of technical expertise.
At a board meeting scheduled tomorrow, the Securities and Exchange Board of India (Sebi) would discuss the progress on the merger process, regulatory changes needed in the commodity market and finalised the regulations, sources said.

Besides Chairman and three whole-time members, the Sebi board comprises of nominees from RBI, Finance Ministry and the Corporate Affairs Ministry, as also independent members.
The board would also discuss the organisational structure for regulating commodities trading and other functional details for this new arena.
A time period of three years may be given to commodity exchanges to have separate clearing corporations, as mandate under the Sebi Act. Besides, a net worth of Rs 100 crore would have to be acquired within three years by the exchanges.

Announced by Finance Minister Arun Jaitley in Budget for 2015-16, FMC's merger with Sebi will help streamline regulations and curb wild speculations in commodities market, while facilitating growth of the market.

Mumbai-headquartered FMC (Forward Markets Commission) was set up in 1953 under the Forward Contracts (Regulation) Act (FCRA) as a statutory body under the aegis of Consumer Affairs Ministry. It was brought under Finance Ministry in 2013.
In the beginning, FMC was only regulating regional commodity exchanges and its role was expanded after the emergence of national electronic trading platform in 2000.
In an interview to PTI, Sebi Chairman had asserted the capital markets watchdog is fully prepared to begin regulating commodities trading and all necessary safeguards would be put in place to keep the scamsters and manipulators at bay.
Sebi may put in place a new set of norms for this segment and the restrictions, including for trading lot sizes, would also be implemented to ensure safety of the small investors.

The commodities market has been known to more prone to speculative activities compared to the stock market, while illegal activities like 'dabba trading' have also been more frequent in this segment.
Besides, the high-profile NSEL scam has rocked this market in the recent past and the subsequent regulatory and government interventions in this case eventually led to the government announcing FMC's merger with Sebi.
At present, there are three national and six regional bourses for commodity futures in the country. Together, all the exchanges clocked a turnover of nearly Rs 60 lakh crore in 2014-15, from over Rs 101 lakh crore in the previous fiscal.

Asked about Sebi's preparedness for regulating the commodities market and his assurance to the investors, Sinha said Sebi has got more than 15 years of experience of managing and regulating the derivatives trading.
Sinha said that Sebi has got sufficient experience on "what should be the contract size, what should be the risk management, how much margin should be taken, how to do the surveillance of trades, how to regulate the brokers and how to regulate the clearing corporations and exchanges".
"On all these things, we have got sufficient experience. To the citizens of this country and the investors, I would like to assure that we are very well prepared for this."

"However, I would like to add one point of caution that these are very technical and risky areas," Sinha said.