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SEBI panel for allowing stock brokers in commodity futures

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MUMBAI, Feb. 6

IN order to boost commodity trading, a SEBI committee has recommended that securities' brokers be permitted to participate in commodity futures market.

The committee has also suggested that existing stock exchanges through their fully owned subsidiaries to function as Commodity Exchange and share their surplus physical infrastructure with commodity exchanges.

The SEBI committee headed by Mr K.R. Ramamoorthy, Advisor - Crisil and former Chairman of Corporation Bank, said "such a move (allowing securities brokers) would lead to increase in number of quality players, boost trading volumes in commodities and provide greater liquidity.

Intending participating securities brokers should enter through a separate legal entity to avoid possible regulator overlap as commodity market falls under the purview of Forward Market Commission, it said. Until now, securities brokers are regulated by SEBI.

The committee said such entity should conform from time to time to the regulatory prescriptions of Forward Market Commission with reference to capital adequacy, net worth, membership fee and margins among other things.

Regulators should ensure strict compliance so that the risks were not transmitted from one market to the other, it pointed out.

Referring to utilisation of existing infrastructure of stock exchanges, the committee said there were no legal or regulatory impediments in SEs sharing their physical infrastructure with commodity exchanges and it would be solely dependent on commercial considerations.

On the issue of convergence and integration of securities and commodities market, the panel was of the view that in the current statutory and regulatory framework and existence of two separate and established regulators, this aspect would require a detailed examination.

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