Leading bourse BSE has urged the government to permit equity exchanges to have a separate commodity derivatives segment, a move that will bring down cost and time as the exchanges already have the necessary technology platform and risk management framework in place.
BSE, which has applied for Sebi approval to launch a commodity segment on its platform, is believed to have made these submissions to the Finance Ministry in its budget wish-list.
The move assumes significance following merger of Forward Markets Commission (FMC) with the Securities and Exchange Board of India (Sebi) in September. This has brought the regulatory control of commodity trading under the Sebi ambit.
BSE, in its pre-Budget document to the ministry, has said that "commodity derivatives can be introduced as a separate segment on stock exchanges".
The bourse noted that the global political and other environmental factors could impact the volatility observed in the commodities markets, making it necessary to have a reliable mechanism of price discovery for such products.
As per BSE, having a commodity platform on an equity exchange can provide various advantages such as a trading engine platform and associated technology infrastructure can be shared with required segregation across various trading segments. This would help reduce cost and time.
It also said that as the clearing corporations have a robust risk management system for managing risk on real time basis, they can undertake clearing and settlement of commodity segment trades without any need to have a separate clearing corporation for this new segment.
Besides, it said the equity exchanges have a state of the art surveillance system which provides real-time supervision of market activity and the same can facilitate members with common interest in securities and commodities.
"Business, technology and operations staff can be resourced/pooled as currently done for currency segment. Thus, duplication of teams across another commodity exchange/ clearing corporation can be avoided," it said.
The commodities market in the country has been known to be more prone to speculative activities compared to the stock market, while illegal activities like 'dabba trading' have also been more frequent in this segment.
At present, there are two major national and six regional bourses for commodity futures in the country.
Earlier, BSE had decided to launch commodity bourse, but has now shelved these plans to have a separate commodity segment on its platform.
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