Proceed with caution: More players in commodities derivatives can be risky

Sebi will essentially be dealing with entities without deep pockets

The Securities and Exchange Board of India’s (Sebi’s) plan to open the commodity derivatives market to more participants and add new trading products is well advised, even though extreme caution is imperative while implementing it. The idea broadly involves roping in institutional participants, such as banks, insurance companies, mutual funds and financial institutions, and allowing additional commodities and products like options contracts to be transacted through commodity exchanges. Greater alignment between spot and futures trading is also on the cards to facilitate farmers and end-users of farm goods to use these markets for better price discovery and risk management. The