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Capital and commodity markets regulator SEBI has issued a consultation paper on ‘one commodity, one exchange’ policy in a bid to reduce fragmentation of liquidity and has sought market participants’ comments within one month.
The move will help commodity exchanges develop expertise in promoting trade in particular commodity derivatives rather than concentrating on too many products. The move will reduce fragmentation in commodity derivatives markets.
“It may not be appropriate to segregate non-agri commodities into ‘narrow’ and ‘broad’ for the purpose of adopting the ‘one commodity one exchange’ policy as in the case of agri commodities, based on annual physical market size,” said SEBI.
Instead, it added, the Joint Working Group has suggested that the policy should be such that ‘one commodity one exchange’ should not be allowed in those non-agricultural commodities where India is not a major producer of the commodity, or India is a price taker of international prices, or significant correlation between Indian prices and international prices exists; besides, in commodities where India is not excessively import-dependent,” said the report.
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