SEBI commodity panel discusses mandatory delivery, longer trading hours

The Securities and Exchanges Board of India's Commodity Derivative Advisory Committee (CDAC) on Thursday discussed making delivery of base metals mandatory for existing exchanges, reducing transaction cost in the commodity market, and extending timings for trading in agri commodities.

The CDAC met on Thursday to discuss various measures for the commodity market. It proposed mandatory delivery of base metals, even for existing exchanges. SEBI had informed new commodity exchanges BSE and the National Stock Exchange that base metal contracts would be settled via physical delivery.

Existing exchange MCX had sought more time to move to physical delivery of base metals. In response to this, a CDAC member at the meeting asked MCX to provide a timeline for its move to physical delivery of base metals from cash settlement.

"MCX needs 1-2 years for making contract from cash settled to physical delivery. They have claimed that need infrastructure for making mandatory physical delivery,” a source who attended meeting told Moneycontrol.

Another source who attended meeting told Moneycontrol: "CDAC told exchanges prepare presentation and give before detailed presentation about required infrastructure and time line for implementation before next CDAC Meetings".

One of the other subjects discussed was reducing cost of transactions in the commodity market. The CDAC told exchanges do a cost analysis for the purpose, after which the regulator could release a public discussion paper.

The National Commodity Derivative Exchange (NCDEX) proposed an extension of timings for trading in agri commodities till 7 pm, or starting the session at 9 am as against 10 am now. However, the CDAC is not convinced about extending timings without properly consulting stakeholders first.

In the meeting, the committee discussed launching new products and the development of the commodity market. As many as 91 commodities are approved for trade by the Ministry of Finance, but only 40 commodities get traded as of now. This can be increased after new commodity exchanges commence operations from October 1.​