Sebi allows convergence of stock and commodity exchanges

Market regulator Securities and Exchange Board of India (Sebi) has taken a slew of decisions, including allowing exchanges to trade in stocks and commodity derivatives, setting easier entry norms for foreign portfolio investors and putting a cap on the cross-shareholding in mutual funds and credit rating agencies.

Sebi's move to allow universal exchange would benefit BSE Ltd and National Stock Exchange to launch commodity platforms.

For smooth implementation, Sebi will enable integration of commodity derivatives market with rest of the securities markets in two phases – first in a restricted intermediary and after removing all restrictions in the second phase.

Effective 1 October 2018, Sebi will remove the restrictions by amending the securities regulations. These changes would then enable a single exchange to operate various segments such as equity, equity derivatives, commodity derivatives, currency derivatives, interest rate futures and debt.

The capital markets regulator announced measures to have a universal exchange and nine other key changes to regulations after its board meeting on Thursday.

While commodity derivatives are traded on separate exchanges, which include MCX and NCDEX, the commodities exchange market has been under Sebi regulation after the payment crisis at National Spot Exchange Ltd, which resulted in the merger of erstwhile Forward Markets Commission with Sebi.

Finance minister Arun Jaitley while presenting the union budget for the FY 2017-2018, had proposed that the commodities and securities derivative markets will be further integrated by integrating the participants, brokers, and operational frameworks.

However, for smoother implementation of the integration of commodity derivatives and rest of the securities markets, Sebi has decided to achieve this in two phases.

Sebi has already taken all necessary steps required to enable integration of commodity derivatives market with rest of the securities markets at intermediary's level. In order to implement phase II, ie, to permit trading of commodity derivatives and other segments of securities market on single exchange, the board approved the proposal to remove the restrictions by making suitable amendments to Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporation) Regulations, 2012 (SECC Regulations). The amendments to the SECC Regulations would be effective from 1 October 2018.