Sebi to consider allowing FPIs in commodities derivatives market

Mumbai: Taking charge of regulating the commodities derivatives market, Sebi Chairman U K Sinha on Monday said it would look at allowing foreign portfolio investors and banks in this market in next few months.

With the Forward Markets Commission (FMC) formally getting merged with Sebi from on Monday, Sinha said the first priority would be to develop trust in the commodities market and then the focus would be on developing the market.

The Sebi chief said that new participants like banks and FPIs (Foreign Portfolio Investors) as well as more products would be allowed.

"These development measures will happen in few months. Right now, our focus would be on placing the regulators environment," he said at an event to mark the merger of commodities markets regulator FMC with the Securities and Exchange Board of India (Sebi).

Further, Sinha said Sebi would focus on how prices and benchmark rates are fixed in commodity markets as well as look at the possibility of having products like options and futures.

Economic Affairs Secretary Shaktikanta Das, who was also present at the event, said Sebi is now the regulator for this market and all its recommendations would be considered by the government in due course.

Commodities market has been hoping for FPIs to be allowed after FMC's merger with Sebi, but the Reserve Bank of India (RBI) recently told the markets regulator to keep any such decision on hold till a policy review is done by the government in this regard.

There were expectations that the merger would pave way for FPIs to participate in the commodities derivatives market, as they are already allowed by Sebi in the capital markets segment under its ambit.

Ahead of the merger, Sebi had written to the Reserve Bank and the government in this regard, to which RBI replied that the status quo should be maintained till a policy review is undertaken by the government for allowing FPIs in commodities derivative trading.

The merger was formalised at the event with Finance Minister Arun Jaitley ringing the customary stock market bell.