Sebi plans measures to ease commodities market, boost participation

Engaging with the government to resolve GST-relate issues, says Chairman Tuhin Kanta Pandey

The Securities and Exchange Board of India (Sebi) is working on measures for developing the commodities market, including steps to increase institutional participation, reviewing norms on margins and position limits, and resolving GST-related issues, Sebi Chairman Tuhin Kanta Pandey said on Saturday.

 

Speaking at the 11th Convention of the Commodity Participants Association of India (CPAI) in New Delhi, the Sebi chief said that working groups have been set up to suggest measures to deepen the agri-commodity derivatives ecosystem.

 

“These expert groups, among other things, are reviewing whether the regulatory framework pertaining to margins, position limits, and delivery and settlement mechanism can be optimised without affecting market integrity,” he said, adding that a working group to review non-agri commodity derivatives will be notified soon.

 

Pandey further said that the markets regulator is engaging with the Reserve Bank of India (RBI) and Insurance Regulatory and Development Authority of India (IRDAI) to enable participation of banks and insurance companies in the commodity derivatives segment.

 

“Enhanced institutional participation will bring in higher liquidity, making the market more attractive for hedging. We will continue engaging with the government to resolve GST-related issues for participants who wish to receive or deliver commodities through the Exchange platform,” said the chairman.

 

The market regulator also plans to extend the common reporting portal available only to stock brokers to commodity-only brokers for simplified reporting.

 

Additionally, a proposal to have a single investor protection fund (IPF) for all products offered by an exchange is also under consideration— a move which will combine the two distinct IPFs maintained for commodity segment and for equities and bonds.  

 

Sebi chairman further called for outreach and education targeted towards farmers, farmer producer organisations, exporters and importers, and hedgers to understand the challenges.

 

The regulator is also reviewing the electronic gold receipts (EGRs) framework.

 

“EGRs were meant to create a regulated market for trading gold and establish India as a global price-setter for gold. While the EGR framework may need a review, I urge the industry to educate its participants and investors to deal only in regulated gold products,” said Pandey.