To focus on boosting commodity market risk mechanisms: SEBI

Himadri Buchmoneycontrol.comThe Securities and Exchange Board of India (SEBI) will focus on strengthening risk management systems for commodity markets, UK Sinha, chief of the market regulator, said today.

"Surveillance for commodity market has been aligned with [levels of] equity market," Sinha said at a press conference where he discussed one year of SEBI's merger with erstwhile commodity market regulator Forward Markets Commission.

The Rs 5,600-crore NSEL scam prompted the government to merge the Finance Ministry-controlled FMC with SEBI in order to help increase regulation of the commodity market.

Since the merger, SEBI has introduced a number of steps to strengthen surveillance mechanisms, introduce more risk controls and deepen the segment.

During the year, the regulator allowed one agri and non-agri commodity for options trading. SEBI will develop the commodities derivatives market cautiously, according to Sinha.

Going forward, SEBI is also looking at other areas to ensure that there is no undue risk in the system, he said today.

"We will go for cautious development in the commodity derivatives market and the caution that we are exercising is primarily to align the system on the commodity derivatives side to those on the equities side," Sinha added.

SEBI is conscious of the fact that the further development of the commodities market is important from the angle of improving liquidity and allowing its benefits to reach all stakeholders.

Earlier this year, the regulator had constituted an Advisory Committee, headed by Prof Ramesh Chand, Member of NITI Aayog, to discuss issues related to the development and regulation of the commodities market in India.

The committee will focus on improving participation of those who want to hedge positions, improve liquidity of contracts, having objective criteria for introducing new commodities for futures trading, improving price polling mechanism and bringing new participants to the marketplace, Sinha said.

He added that SEBI is in talks with other regulators for allowing other institutions to trade in the commodity derivatives market.