New Delhi, Apr 14: To deepen commodities derivative markets, regulator Sebi is mulling allowing new products and institutional players while an integrated database is in the works for agriculture as well as non-agri products to better understand the domestic and international trends. Through this database, Sebi intends to become a “timely input provider” to the government in commodity market-related matters as any volatility and instability in agri-commodity prices are highly sensitive in nature and can have significant impact on the economy.Also Read - Your Demat, Trading Accounts Will be Deactivated if KYC Not Updated by July 31 | Details Here
While spot markets in commodities do not come under Sebi’s purview, instances of volatility emanating in underlying markets may raise questions on commodity future trading and regulation. “In this scenario, Sebi is looking to strengthen its presence in the macro milieu of the commodity markets and evolve as a timely input provider to the government,” stated the regulator’s Plan of Action for this market in 2016-17. Sebi is also working on introduction of new products such as commodity options, index futures and index while allowing institutional participants such as banks and foreign portfolio investors (FPIs) is also under active consideration.(Also Read: Sahara Vs Sebi: Weeks before being jailed, Sahara chief wanted to go abroad!) Also Read - Full Lockdown in Kerala From Today: State Govt Relaxes Guidelines For Banks, Financial Services
The objectives of commodity derivatives markets are price risk management and efficient price discovery so as to enable producers, importers and exporters to hedge their risk and take sowing decision, or plan import and export. In this regard, institutional participants are important from the perspective of providing liquidity in the market. The regulator is also looking at detailed disclosure guidelines for the commodity derivatives market. According to Sebi, it has been predominantly a participants market and information is available only to those participants and investors are not privy to such information. Also Read - Axis Bank, Promoter United India Insurance Settle Cases of Alleged Disclosure Lapses with Sebi
Therefore, it is working on a policy for mandatory periodical disclosures on commodity derivatives exchanges for increased transparency and better corporate governance. The integrated database will centralise all data pertaining to commodities — historical as well as current, domestic as well as international, agriculture as well as non-agriculture — and work as a feeder for Sebi’s own policy formulation for commodities derivatives function. At present, data about commodity markets, domestic and global, is dispersed and disintegrated.
Domestically, commodity data scenario lacks uniformity in dissemination, frequency and coverage of variables and reliability. Sebi feels that agricultural commodity markets are highly sensitive to demand-supply mismatches and any volatility and instability stemming from agri-commodity markets have disproportionate impact on the economy and government. The proposed historical commodity-wise and market database on variables in the underlying market will help in timely regulation, surveillance and research, as also help portend early warning signals based on the seasonality trends and forecasts.