Banks, insurers and pension funds may get to trade commodity derivatives

Mumbai: The Securities and Exchange Board of India (Sebi) is considering widening institutional participation in the commodity derivatives market, its chief Tuhin Kanta Pandey said on Wednesday.

The regulator will engage with the government to allow banks, insurers and pension funds to trade in these markets. It is also examining a proposal to allow foreign portfolio investors to trade in non-cash settled non-agricultural commodity derivative contracts, he said. "Strengthening India's commodity markets is high on Sebi's regulatory agenda," Pandey said at an event hosted by MCX. "Enhanced institutional participation will bring in higher liquidity, making the market more attractive for hedging."

Currently, large corporates, traders, importers and SMEs (small and medium enterprises) actively participate in the commodities market. Institutional investors like mutual funds and alternative investment funds are increasingly recognising metals as an asset class that improves risk-adjusted returns for investors, he said.


The regulator has already constituted a committee to recommend measures for deepening the agricultural commodities segment and will also form a working group for developing the non-agricultural commodity space, including metals, according to Pandey.

By December, Sebi will include commodity-specific brokers in the Samuhik Prativedan Manch, a common reporting mechanism for compliance reports.