Banks, MFs entry into commexes hangs in balance
Banks and mutual funds (MFs) will need to wait longer to participate in the local commodity futures market.
By Nidhi Sharma & Deepa Krishnan, ET Bureau |
MUMBAI: Banks and mutual funds (MFs) will need to wait longer to participate in the local commodity futures market. The Forward Markets Commission (FMC) ��� the commodity market regulator has said that the entry of institutional players will hinge on the strengthening of the regulatory architecture for the commodities market.
Allowing banks and mutual funds to get into this segment does not entail any amendments to the Forward Contract Regulation Act (FCRA). An executive notification by the banking and securities market regulator should be good enough but the FMC has decided to take a cautious approach.
BC Khatua, chairman of the Forward Markets Commission said that the commission did push for the participation of banks and mutual funds after the FMC was granted autonomy through an ordinance in January 2008. However, the ordinance lapsed in April and the FCRA amendment bill did not come up for discussion in the Parliament.
Mr Khatua further said: ���The FMC needs to be strengthened before these entities are allowed participation���. This can happen if amendments to the FCRA bill are approved by the Parliament.
The entry of banks and mutual funds is expected to strengthen and deepen the markets. A proposal for allowing these institutional players to foray in to the commodities market was mooted over two years ago.
The FMC is now in the process of firming up detailed norms for acquisition of the existing commodity exchanges. Broad guidelines for the demutualisation have already been incorporated in the FCRA.
As for the pattern of ownership in commodity exchanges, Mr Khatua said, they would not follow the stock exchange pattern as the commodity market is different. ���The commodity market has evolved differently and we do not want to repeat the mistakes of the capital markets,��� he said.
The FMC chief said that regional exchanges have a strong domain knowledge coupled with participants who have been trading for long.
���These regional exchanges are attractive for prospective partners,��� he said. The commission announced the guidelines for setting new commodity exchanges in May. According to these norms the promoter���s share has been capped at 40% of the paid-up capital of the company.
Allowing banks and mutual funds to get into this segment does not entail any amendments to the Forward Contract Regulation Act (FCRA). An executive notification by the banking and securities market regulator should be good enough but the FMC has decided to take a cautious approach.
BC Khatua, chairman of the Forward Markets Commission said that the commission did push for the participation of banks and mutual funds after the FMC was granted autonomy through an ordinance in January 2008. However, the ordinance lapsed in April and the FCRA amendment bill did not come up for discussion in the Parliament.
Mr Khatua further said: ���The FMC needs to be strengthened before these entities are allowed participation���. This can happen if amendments to the FCRA bill are approved by the Parliament.
The entry of banks and mutual funds is expected to strengthen and deepen the markets. A proposal for allowing these institutional players to foray in to the commodities market was mooted over two years ago.
The FMC is now in the process of firming up detailed norms for acquisition of the existing commodity exchanges. Broad guidelines for the demutualisation have already been incorporated in the FCRA.
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As for the pattern of ownership in commodity exchanges, Mr Khatua said, they would not follow the stock exchange pattern as the commodity market is different. ���The commodity market has evolved differently and we do not want to repeat the mistakes of the capital markets,��� he said.
The FMC chief said that regional exchanges have a strong domain knowledge coupled with participants who have been trading for long.
���These regional exchanges are attractive for prospective partners,��� he said. The commission announced the guidelines for setting new commodity exchanges in May. According to these norms the promoter���s share has been capped at 40% of the paid-up capital of the company.
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