Commodities need institutional participants

Securities and Exchange Board of India (SEBI) will take all necessary steps for deepening of the commodity derivatives market, a Whole Time Member of the board has assured the Indian industries.

Of the 3Ps required to build any market, Policy, Product and Participants, the first two were already in place and the eco-system should ensure education and awareness to promote participation, said S.K. Mohanty, SEBI’s Whole Time Member.

Speaking at the conference on ‘Institutional Participation – Ushering a New Era in Commodity Derivatives Market’, Mohanty said that the regulatory ecosystem in India’s commodity derivatives market was at par with other developed markets.

Attributing this to the positive steps taken by SEBI over the last three years, Mohanty said SEBI has done reasonably well on this front.

“Mutual fund participation will be a game changer in the commodity derivatives market and will open a gateway for the ETF segment,” the regulator said.

“With the participation of institutional investors such as mutual funds, there will be information-based trading as against random trading”, he explained and shared his optimism about the positive role the institutional players can play in making the market more robust, liquid and inclusive.

“With the participation of institutional investors such as mutual funds, there will be information-based trading as against random trading”, he explained and shared his optimism about the positive role the institutional players can play in making the market more robust, liquid and inclusive.

The event was organized by the Federation of Indian Chambers of Commerce and Industry jointly with MCX Investor Protection Fund in Mumbai on 28 Feb 2019.

“Institutional participation has been a long pending need for the growth and development of the commodity derivatives market,” added Mrugank Paranjape, Chairman, FICCI National Committee on Commodities and MD & CEO, MCX.

“The presence of financial institutions such as mutual funds can not only offer the common domestic investors an additional avenue for better financial investment but can also make this market more robust by providing liquidity especially to the far months’ contracts.

“Enhanced liquidity and presence of diverse participation groups including hedgers and financial institutions would strengthen the price discovery mechanism and make risk management on exchange platforms more efficient and cost effective to the stakeholders by lowering the impact cost of trade,” Paranjape said.

Participation of institutions such as mutual funds, banks, insurance companies, and pension funds among others, will be a stepping stone for further advancement and growth of commodity market in India, according to Jaspal Bindra, Chairman, FICCI Maharashtra State Council and Executive Chairman, Centrum Group.

“Their entry will not only benefit the market by way of infusion of liquidity but also through enhanced access to a large number of potential participants in this market,” said Bindra.

Meanwhile, SEBI has made it easy accreditation of investors’ participation in startups.

It has also approved accreditation framework of investors for Innovators Growth of Platform, a new name for startups to be listed on Indian bourses.

Fees charged from brokers, stock exchanges and the companies seeking to get listed is also being lowered. Brokers has been lowered to Rs.10 per crore transaction from Rs.15 and Rs.1 from Rs.15 for agri-commodity derivative transactions, Press Trust of India.

The SEBI will also amend norms for valuation of money market and debt securities by Mutual Funds to make the process fairer and uniform across the industry to safeguard investors from default-like scenarios as witnessed recently in the wake of IL&FS crisis. Fiinews.com