A panel set up by
SEBI will recommend easing curbs on commodity
derivatives and suggest steps to make it more attractive to
institutional investors in a final report to be submitted early
next year, three sources with direct knowledge of the matter
said.
The Securities and Exchange Board of India (SEBI), which saw
a change of guard in March with former bureaucrat Tuhin Kanta
Pandey taking over as chief, set up the panel earlier this year.
Under Pandey, SEBI had liberalised rules for equity markets
this year and is expected to introduce reforms for commodity
derivative markets.
“Strengthening India’s commodity markets is high on
SEBI’s regulatory agenda and it aims to deepen and widen
participation,” Pandey had said previously.
The sources declined to be identified as they are not
authorised to speak to the media. An email query sent to SEBI
seeking comments on Monday was not answered.
Loosening hold on agricultural commodities
The panel will recommend lifting a ban on derivatives
trading in seven agricultural commodities including paddy,
wheat, crude palm oil.
Derivatives trading in these commodities has been repeatedly
banned since 2021 due to concerns over speculative activity
spilling over into on-ground prices of these widely consumed
commodities.
The panel will present data that show price trends of these
key commodities have not changed significantly before or after
the ban, they said.
The panel members suggested that derivatives trading has
little impact on agricultural prices and therefore say the ban
is not warranted, two sources said. The SEBI management
concurred with this opinion, the sources added.
The panel is also recommending a change to the tax law to
clearly define the tax rate of commodity derivatives under Goods
and Services Tax (GST).
“Once the panel submits its report SEBI will request the
government for changes,” said one of the sources.
Boosting institutional trading
The SEBI panel will also recommend that trading firms be
allowed to colocate on exchange premises for trading commodity
derivatives, the source said.
Colocation allows faster access to data and trading is
currently permitted for equities but not for commodities.
“Most of the global firms trade via colocation so the panel
and SEBI are inclined to allow it in metals and energy. On
agri-commodities there have been historic inflationary
concerns,” so this segment may be excluded from colocation, said
one of the two sources.
In addition the panel would also recommend margin reduction
for agricultural commodities to boost trading, the source said.
Reuters had reported in September that SEBI was in
discussion with the government and central bank to enable banks
and pension funds to trade commodities.
“SEBI is waiting for the panel’s report before it approaches
Reserve Bank of India (RBI) and government with a formal
proposal for bank, pension fund and insurance companies to trade
in commodities,” said the first of the three sources.