Sebi may allow foreign entities in commodity derivatives mkt

Source: The Hitavada      Date: 19 May 2018 09:32:48




WITH an aim to deepen the commodity derivatives market, regulator Sebi on Friday proposed allowing trading in this segment by foreign entities with exposure to the Indian physical commodity market. To begin with, foreign entities may be allowed to hedge their exposures with derivatives trading in only those commodities where India has a large production, consumption or export share globally, barring the sensitive commodities. Proposing a detailed set of norms for eligibility criteria, disclosure and KYC requirements, code of conduct and safeguards against any unwanted price fluctuations, Sebi, in a consultation paper said that the final regulations would be framed after taking into account public comments till June 18.

The proposal follows recommendation from the regulator’s Commodity Derivatives Advisory Committee (CDAC) for allowing in this market the hedge funds (category III alternative investment funds), portfolio management service (PMS) firms, mutual funds and direct participation of foreign participants having exposure to commodities in the first phase. In the second phase, the CDAC has proposed to allow banks, insurers, foreign portfolio investors and pension funds in the commodity derivatives market. Earlier last year, Sebi had issued consultation papers for allowing mutual funds, portfolio managers and hedge funds, among others.

Sebi said it has been advised by the CDAC to adopt a calibrated approach before opening up the commodity derivatives market to foreign participation where, presently the domestic institutional participation is also not allowed. According to Sebi, allowing direct participation of foreign entities having actual exposure to commodities may make Indian commodity derivative markets more broadbased, vibrant, deep and efficient.