Mumbai: Stock exchanges will have to “wait for some time” to start their own commodity derivatives trading platforms, Sebi Chairman U K Sinha said today, as he stressed on the need to first strengthen the risk management framework for this entire marketplace.
He also said that entry of new participants like banks and insurers may also take some time as there are other regulators involved and even FPIs cannot be allowed before domestic institutions are brought in.
However, new products like options contracts and some index-based products should be in place earlier, maximum by the end of the current fiscal, he hinted.
Asked why Sebi was not allowing the stock exchanges to start commodity platforms, Sinha said, “BSE wanted a commodity platform. We told them that they will have to wait for some time as we are not very comfortable with the risk management framework in the entire commodity marketplace as yet.
“We are working on that and once we are comfortable. But some time does not mean few years, but may be just a few months,” he said.
On new products, Sinha said a product must have potential for enough liquidity to be allowed but all the aspects are being looked into by a Task Force.
“Allowing banks and financial institutions is also under consideration. We are also looking at how to improve participation of hedgers. For banks and insurers, other regulators would first need to give approvals and we will allow FPIs also only after domestic institutions are permitted,” Sebi’s Whole Time Member Rajeev Agarwal said.