NEW DELHI (Commoditiescontrol) - Merger of Forward Markets Commission (FMC) with Securities and Exchange Board of India (SEBI) is perceived as a positive step for the commodity markets which has been reeling under a number of setbacks for the last few years.
Commodity markets experts say that market could see a great boost in investors confidence and larger scope for new products with stringent regulation.
Mr. Veeresh Hiremath, Research Head of Hyderabad-based Karvy Comtrade said that Union Finance Minister Mr. Arun Jaitley has announced the merger after thorough discussion at large. After the exposure of NSEL scam, there were doubts regarding proper regulation by FMC due to various reasons. Now the market will have to face stringent regulations. Wild speculations and roller-coaster fluctuations in commodity prices will be controlled. In such regime, investor confidence will be rebuilt. Investors can expect required action by SEBI against marketers in case of violations of norms.
He told commoditiescontrol.com that presently, options and index trading is not permitted in commodity exchanges. SEBI can allow for new products including these two products. So exchanges will have huge scope for business. According to him, government’s announcement will take around one year’s time for implementation. It is a gradual and lengthy process for merger of functioning of commodity regulators.
Mr. V. Kumar, Director of Chandigarh-based commodity broking firm Vikson Commodities agreed with Mr. Hiremath. He said that market will be benefited from this step. Investors can hope for better regulations so their confidence get much required fillip. Trading in commodities is declining as investors’ confidence is on the fall. Better regulation will help exchanges bring back the investors.
Mr. Rajesh Jain, a physical trader from Delhi wheat market also feels that proper regulation can control wild trading in futures market. Presently, futures market drives spot market. It should happen the other way round, he said. Commodity markets need better regulation so it can function as per it’s mandate.
According to some sources, the merger of FMC with SEBI will take place in phases. However, the move will first need an amendment of the Securities Contracts (Regulation) Act (SCRA) which does not currently include commodity derivatives under the definition of securities. The government will have to empower SEBI to regulate commodity markets also.
Currently, SEBI does not have right to regulate commodity trading. Physical transaction of commodity exchanges does not come in the ambit of SEBI. According to Mr. Hiremath, SEBI might have a separate division for regulation of commodity markets.
(By Commoditiescontrol Bureau; +91-22-61391533)
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