With the number of exchanges offering commodity derivatives on the rise and national-level equity bourses also entering the fray, the Securities and Exchange Board of India (SEBI) is making all attempts to bring uniformity among the bourses in a segment which came under its regulatory purview only three years ago.
The capital markets regulator has decided to meet the chief regulatory officers (CROs) of all six exchanges that offer commodity derivatives trading once every quarter to discuss regulatory and compliance matters in order to enhance uniformity amongst the bourses.
Diversified segment
This assumes significance as, unlike the equity segment with two main bourses and identical product offering, the commodity derivatives segment is quite diversified with each exchange having created a niche in a certain category of commodities.
‘Need better oversight’
“Commodity market is not linear like equities and hence requires more coordination and oversight,” said a person familiar with the SEBI initiative.
“Each bourse has specialised in its own set of commodity offerings and the dynamics of every commodity differs due to the nature of the underlying spot.
There is uniformity among equity exchanges due to the regulatory oversight over the past many years. That needs to be replicated in the commodity segment,” he added.
While earlier there were only two major commodity bourses – Multi Commodity Exchange of India (MCX) and the National Commodity and Derivatives Exchange (NCDEX) – the recent past has seen BSE and the National Stock Exchange (NSE) also entering the arena.
Apart from these, there is also Metropolitan Stock Exchange of India (MSEI) and the Indian Commodity Exchange (ICEX).
MCX is, by far, the biggest player in the commodity segment having a market share of over 90%. It dominates the arena with its energy and bullion commodity contracts, while NCDEX is known for its offerings in the agriculture space.
Both, BSE and NSE started their commodity segment late last year and currently offer non-agri contracts. ICEX offers trading in diamonds and steel.
Meanwhile, The SEBI initiative is aimed at creating “uniformity across exchanges while dealing with regulatory and compliance matters.”
Incidentally, SEBI already has a Commodity Derivatives Advisory Committee (CDAC) which has representations from the commodity bourses apart from officials of various Ministries and commodity market industry groups.