Sebi eyes greater depth in futures

Mumbai: The Sebi is considering a proposal to allow mutual funds, alternative investment funds and foreign portfolio investors (FPI) to participate in commodity futures trading in order to inject greater liquidity and deepen the market.

The regulator also plans to introduce options contracts in the commodity derivatives market. These proposals were a part of the suggestions made by the commodity derivative advisory committee (CDAC) of SEBI.

While addressing a conference on Agri Supply Chain organised by industry body CII, P.K. Bindlish, chief general manager, Sebi said, “We are considering various proposals like improving hedgers participation in the commodity derivative market, how to improve liquidity in various commodity futures contract to address the issue of concentration risk, the criteria for allowing commodities to be included in the futures trading platform and permitting institutional investors like mutual funds and FPI’s”.

The regulator further plans to bring out a new set of regulations to strengthen the warehousing segment by prescribing the ownership criteria, minimum net worth requirement and dispute resolution mechanisms to ensure an orderly conduct of the markets.  

Last year, the commodities future trading was brought under the supervision of Sebi by merging Forward Markets Commission (FMC) with the capital market regulator.

Over the last one year, Sebi had taken a number of measures to strengthen the regulation and risk management system in the commodities futures market to bring it at par with equity and equity derivatives market.  

However, Mr Bindlish pointed out that the commodity spot market has emerged as major source of concern. “Lot of issues are emanating from the spot market. Since it is unregulated and highly fragmented, it is coming in the way of efficient price discovery in the futures market,” he said