After formally taking over as the commodity market regulator, beside the existing responsibility for the capital market, UK Sinha, chairman of the Securities and Exchange Board of India, spoke to journalists. Excerpts:
What are your priorities?
Sebi will try to ensure no disruption in the way commodity market participants do their business.
On day one, they will continue doing business as usual. We will give all participants some time to transform into the requirements of Sebi.
Sebi will concentrate on risk management measures. It will also ensure no major diversions between the physical and derivatives markets.
We want a smooth transition since day one. We are reasonably assured about our capacity to regulate.
When new products will be permitted?
Sebi will be taking a number of measures to develop a derivatives market of commodities.
These can include allowing commodities exchanges into the securities markets and securities exchanges to start commodity derivatives.
The Finance Act provides such room.
Similarly we will permit those participants that had not been allowed to participate in the commodity derivatives markets, like banks and foreign portfolio investors.
Products like options and index trading will also be permitted.
In the next few months, we will move towards development measures and, I repeat, in a few months.
What is the future of agri futures?
On a long-term basis, we would like to ensure the correct signals are given by the market and the regulator, so that farmers can decide and plan sowing and marketing of agri produce. Market signals should be helping him in hedging the risk.
In the long run, we also want that in commodities where India is a dominant player, we should be the price setter.
This can be achieved in gold and petroleum products. We have already set road maps for the short, medium and long term.
When will stock exchanges be allowed to be listed?
Our current regulations provide for this listing. There are certain conditions — they should be compliant (with the rules) and we do not allow self-listing. Today’s event was one of the things at the back of our mind.
Sebi is not against listing of exchanges. We will be coming out with some more guidelines to allow them to list.
Challenges you faced for the merger?
This is not a very easy thing to do. Merger of business entities is common across the world but you will find very few examples for merger of regulatory entities.
Our immediate task will be to regulate properly, assure ourselves that we are in control of the situation, that we are not missing out on anything. Then, we will go for development. However, it will not take years; it will take a few months.
Delivery plays an important role in commodities. Will you bring warehouses under the control of Sebi?
Our starting point will be to adopt measures to ensure physical delivery in the right quantity and quality, in a concrete manner. We will focus on seeing that grading, assaying, etc, is done properly, to see that what is delivered is what was promised.
After the GST (goods & services tax) rollout in 2016, physical delivery will go up. How is Sebi preparing a road map?
The physical market for agri produce will continue functioning the way as it now does.
They are not under Sebi. However, we would like one common nationwide electronic market for agri commodities. While this will not fall under our direct domain, we will work with the central and state governments in this direction.
No settlement guarantee fund and investor protection fund for forward contracts. How will you regulate this segment?
The merger happened today. We are not in a position to answer this in detail.