PTI
Mumbai
As the NSEL scam continues to rattle investors in the commodities market, regulator Sebi Thursday ruled out allowing trading in any new commodity futures unless assured of sufficient liquidity.
“Sebi has been very careful in allowing trading in new commodities. We want to do that but we will be doing it very carefully. Unless we are assured that there's enough liquidity likely in some commodities, we will not consider that,” chairman U K Sinha said.
The decision comes almost three years after the Rs 5,600 crore scandal broke out at Financial Technologies-run National Spot Exchange (NSEL) in July 2013, which dealt a blow to the then thriving commodities markets.
The case is still pending with meagre recoveries and repayments to over 11,000 investors happening in bits and pieces.
Sebi took over the regulation of the commodities market in September 2015 after the Forward Markets Commission, which had the mandate to regulate the commodities trading including futures, was merged with the stock market regulator.
The NSEL scam was one of the reasons that led to the merger.
The government allowed futures trading in commodities only a decade ago but the market could not gain dept due to the absence of large institutional players due to government ban on their participation.
The Sebi chief also said they are continuously reviewing the risk management framework in the commodities segment and it will take a few more months to bring in a mechanism to the level of securities market.
Explaining the rationale, Sinha further said “problems in the physical market and also the stage of development of warehousing mechanism in our country do not give us the comfort that we can progress on the same in a big way immediately”.
Noting that surveillance and risk management framework in commodities markets is developing, Sinha said the process of bringing the system at par with equities market will take a few more months as their review process of the existing mechanism is on.
“The risk management issue in the commodities market is at a stage which is not giving us a comfort that it is as advance as it is in the securities market. We've been continuously trying to improve that system through a series of measures. For example, we've weekly meetings with the exchange, we review the trades, we also use surveillance mechanism,” he said.
