The Securities and Exchange Board of India (Sebi) says it is likely to act against entities violating the Essential Commodities Act, if they were present in the commodity futures markets. The Act empowers the central and state governments to control production, supply, and distribution of certain commodities, in view of rising prices.
“The authorities in various states have conducted raids and have seized some stocks. Sebi is looking into the matter. If any of those have violated the (EC) Act or the control orders are also players on the commodity market, there is a case for Sebi to take action,” said U K Sinha, chairman of Sebi, at a conference on a different subject.
After the merger into Sebi of the Forward Markets Commission, the capital markets watchdog is also regulating the commodity futures markets.
Recently, various state governments conducted raids across the country to check hoarding of pulses and claims of seizure total at least 75,000 tonnes. One of these raids was at a warehouse in Maharashtra’s Akola district, one which had been approved by the National Commodities and Derivatives Exchange (NCDEX).
This newspaper has learnt that Sebi has sought a report from the commodity exchange.
An NCDEX spokesperson said, “Sebi has been seeking (this) data and its analysis from the exchange as a part of its routine surveillance and monitoring activities. The exchange has been submitting various analytical reports on underlying fundamentals, price movements and trading on the exchange platform.” NCDEX, the spokesperson added, was extending all necessary cooperation to government departments for curbing hoarding and other malpractices. The warehouse at Akola was inspected by district food and supply officials, for alleged violation of stock limits for storage of soya bean. They say they found 498 tonnes of soya bean and 40 tonnes of cottonseed oilcake.
“No forward contracts on pulses today. The only relevant contract is chana (chickpea), where the futures price is lower than the spot price today. So, to imagine that the future price today is leading to speculation is wrong,” said Sinha.
Regulator on ETF norms
Pitching for more transparency on exchange-traded funds, Sinha on Monday said Sebi was willing to make changes to rules for the product, based on market players’ and experts’ inputs.
Noting that ETF is a significant financial instrument, Sinha cautioned that any further innovation to the product should be dealt with carefully, to avoid any risks to investors and markets.
"If we are able to avoid those risks, make proper disclosures, are able to communicate properly, then ETF has a very good chance of growing in India and provide good services to investors," he said.
On the possibility of introducing ETF based on commodities, Sinha said that introduction of new players and products would be happen after a few months.
"We first have to be fully satisfied that all regulations and safeguards are in place," Sinha said.
He said the regulator would go for product development and business development once the system was tested.
Sinha said the primary reason for having an ETF was liquidity.
"In case there is a crisis and people get a perception there are serious risks, it could affect the product," Sinha said.
ON THE RADAR
Stock market regulator will act if commodity members are found violating the essential commodities Act
Regulator sought report from NCDEX on raids at a warehouse approved by the exchange
- Regulator has ruled out any risk to commodity derivatives market