New Delhi: Capital market regulator SEBI has been proposedone commodity one exchangeConcept to reduce liquidity fragmentation and help each stock exchange to develop a specialized set of non-volatile liquid contracts.
In a consultation paper, the regulator said it has prepared a concept note on developing a uniquely specific set of commodities for trading in the commodity derivatives segment and reducing fragmentation in the commodity derivatives market.
The regulator has proposed that the concept should be applicable only to narrow agri-commodities and non-agricultural commodities should not come under its purview.
Agricultural commodities are classified into three categories – sensitive, broad and narrow.
The ‘Exclusivity’ status of an item will last for 3-5 years from the date of SEBI approval.
NS Securities and Exchange Board of India (SEBI) has sought comments from the public on this proposal by January 7.
The main objective of developing the concept is to help each exchange develop a specialized set of non-consolidated liquid contracts on specific commodities.
In addition, the concept will ensure that the respective exchange develops all kinds of derivative contracts exclusively on a specific commodity and brings about a wider development and deepening of the Indian commodity derivatives markets.
Sebi on Tuesday said the concept will eventually help India in a position to be able to influence global benchmark pricing of such commodities.
“Even though multiple exchanges that have the option of launching competitive contracts on the same commodity may be good for encouraging competition and providing options to investors, a single exchange launching contracts on a specific commodity can have a large impact both locally and internationally. It may be more efficient and less costly in the long run,” SEBI said.
With regard to the process of recommending exclusivity, SEBI proposed that exchanges may choose to ‘block’ a commodity with the regulator if that commodity is subject to a particular commodity contract before undertaking intensive research and mass market. eligible for development. Negotiation, by obtaining an in-principle MoU from it.
Post-blocking, exchanges will get one month to conduct detailed research and analysis of the proposed commodity and confirm the ‘block’ by sharing the feasibility report with SEBI. The blocking will be done by SEBI on the basis of ‘first in first out’ method. If the exchange does not confirm the block within a month, the block will be automatically issued on that particular commodity.
While a commodity is ‘blocked’ by one exchange, it cannot be blocked by another exchange. In addition, no more than two commodities may be placed in ‘blocked’ or ‘exclusive status’ for exchange at any one time.
There should be a gap of at least one month between the blocking of two different commodities by the same exchange.
The application for product approval must be submitted to the regulator within six months from the date of confirmation of an item being ‘blocked’, otherwise the block will be automatically issued.
On failure, the Exchange will not be allowed to apply for exclusivity on the same product for a period of at least one year.
The regulator said the ‘exclusivity’ status of an item will last for 3-5 years from the date of SEBI approval and the exchange can close the position even before this period.
Exchanges will have to decide whether they want to remove the exclusivity from the product only after it has been liquidated continuously for 12 months.
The regulator proposed that the derivatives contracts on new commodities would be traded on only one stock exchange for a period of 3-5 years during which the said stock exchange would be permitted to launch all types of permissible products i.e. futures, futures on options and Will be Options on goods, among others.
CPAI Chairman Narinder Wadhwa said that SEBI is taking proactive steps in the development of commodity derivatives markets and this is an initiative to open various eligible commodities for all exchanges and after experiencing fragmented trading.
“While we are against the idea of blocking because it is against the spirit of free markets, we also need to try this process for the markets to develop because exchanges put a lot of effort into developing contracts and they need to be implemented within a few years. requires some specificity, the hope is that the blocking is for a period of 3-5 years as mentioned in the paper,” he said.
He further said that there is a need to ensure that non-agricultural products do not come under its purview, narrow agricultural commodities do not gain much traction in any case.
Arshad Fahoum, Chief Product Officer, MarketPulse, said, “If implemented well, the concept of ‘One Commodity One Exchange’ can be used to take care of a particular commodity in terms of integrating the liquidity existing across multiple exchanges into a single exchange. promises to enable said.
Given that India is one of the world’s leading producers of agricultural commodities, and that the concept would only apply to narrow agri-commodities, efforts should be made to ensure that unbroken liquidity and potential growth in volume and open interest would be available to India. Help us become one. Value creators in these items, he said.
In a consultation paper, the regulator said it has prepared a concept note on developing a uniquely specific set of commodities for trading in the commodity derivatives segment and reducing fragmentation in the commodity derivatives market.
The regulator has proposed that the concept should be applicable only to narrow agri-commodities and non-agricultural commodities should not come under its purview.
Agricultural commodities are classified into three categories – sensitive, broad and narrow.
The ‘Exclusivity’ status of an item will last for 3-5 years from the date of SEBI approval.
NS Securities and Exchange Board of India (SEBI) has sought comments from the public on this proposal by January 7.
The main objective of developing the concept is to help each exchange develop a specialized set of non-consolidated liquid contracts on specific commodities.
In addition, the concept will ensure that the respective exchange develops all kinds of derivative contracts exclusively on a specific commodity and brings about a wider development and deepening of the Indian commodity derivatives markets.
Sebi on Tuesday said the concept will eventually help India in a position to be able to influence global benchmark pricing of such commodities.
“Even though multiple exchanges that have the option of launching competitive contracts on the same commodity may be good for encouraging competition and providing options to investors, a single exchange launching contracts on a specific commodity can have a large impact both locally and internationally. It may be more efficient and less costly in the long run,” SEBI said.
With regard to the process of recommending exclusivity, SEBI proposed that exchanges may choose to ‘block’ a commodity with the regulator if that commodity is subject to a particular commodity contract before undertaking intensive research and mass market. eligible for development. Negotiation, by obtaining an in-principle MoU from it.
Post-blocking, exchanges will get one month to conduct detailed research and analysis of the proposed commodity and confirm the ‘block’ by sharing the feasibility report with SEBI. The blocking will be done by SEBI on the basis of ‘first in first out’ method. If the exchange does not confirm the block within a month, the block will be automatically issued on that particular commodity.
While a commodity is ‘blocked’ by one exchange, it cannot be blocked by another exchange. In addition, no more than two commodities may be placed in ‘blocked’ or ‘exclusive status’ for exchange at any one time.
There should be a gap of at least one month between the blocking of two different commodities by the same exchange.
The application for product approval must be submitted to the regulator within six months from the date of confirmation of an item being ‘blocked’, otherwise the block will be automatically issued.
On failure, the Exchange will not be allowed to apply for exclusivity on the same product for a period of at least one year.
The regulator said the ‘exclusivity’ status of an item will last for 3-5 years from the date of SEBI approval and the exchange can close the position even before this period.
Exchanges will have to decide whether they want to remove the exclusivity from the product only after it has been liquidated continuously for 12 months.
The regulator proposed that the derivatives contracts on new commodities would be traded on only one stock exchange for a period of 3-5 years during which the said stock exchange would be permitted to launch all types of permissible products i.e. futures, futures on options and Will be Options on goods, among others.
CPAI Chairman Narinder Wadhwa said that SEBI is taking proactive steps in the development of commodity derivatives markets and this is an initiative to open various eligible commodities for all exchanges and after experiencing fragmented trading.
“While we are against the idea of blocking because it is against the spirit of free markets, we also need to try this process for the markets to develop because exchanges put a lot of effort into developing contracts and they need to be implemented within a few years. requires some specificity, the hope is that the blocking is for a period of 3-5 years as mentioned in the paper,” he said.
He further said that there is a need to ensure that non-agricultural products do not come under its purview, narrow agricultural commodities do not gain much traction in any case.
Arshad Fahoum, Chief Product Officer, MarketPulse, said, “If implemented well, the concept of ‘One Commodity One Exchange’ can be used to take care of a particular commodity in terms of integrating the liquidity existing across multiple exchanges into a single exchange. promises to enable said.
Given that India is one of the world’s leading producers of agricultural commodities, and that the concept would only apply to narrow agri-commodities, efforts should be made to ensure that unbroken liquidity and potential growth in volume and open interest would be available to India. Help us become one. Value creators in these items, he said.
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