Sebi to allow MFs, PMS in commex derivatives soon

Commodity derivatives markets (CDM) could see a deepening of participation within the next six months, with the regulator in advanced stages of permitting mutual funds and portfolio management service (PMS) providers to trade on the 14-year-old platform, Sebi ED SK Mohanty said on the sidelines of FICCI conference here on Tuesday.

Mohanty also called upon big corporate houses to hedge on domestic exchanges in the light of the upcoming institutional participation instead of participating in overseas exchanges.

ET first reported about MFs and PMS being allowed in commodity derivatives in the coming months in its edition of September 11.

PMS is provided by wealth management arms of brokers. In June, Sebi allowed commodity exchanges such as MCX and NCDEX to launch options on commodity futures and permitted Cat III AIFs -hedge funds and private equity funds that invest in listed companies -to participate in the CDM.

Much of the participation is currently confined to retail and wholesale traders, speculators and a few corporate hedgers, including jewellers, bullion dealers, grain dealers, etc.

Since both mutual funds and PMS are regulated by Sebi, the decision to allow their participation can be taken much before that on opening the market to foreign portfolio investor (FPI) participation and that by banks and insurance companies subject to regulatory consultation and approval of RBI and IRDA.

While allowing FPIs will take time and changes in regulatory framework for commodities, Sebi is considering permitting foreign firms with exposure to but no presence in India to hedge their price risk on domestic commodity bourses.

Sebi took over regulation of the CDM in September 2015, after the government decided to merge the erstwhile regulator Forward Markets Commission with it.