The need for integration of spot and derivative markets in commodities has for long been discussed in policy and academic circles. The recent report of the Niti Aayog under the chairmanship of Ramesh Chand offers justification for such integration and proposes operational and legal guidelines based on archival information and a few empirical studies conducted in the concerned space. The Committee’s recommendations are indeed optimistic and forward looking, but the implementation will take longer than expected due to the requirement of regulatory convergence among several market infrastructure institutions. The proposal to make the Securities and Exchange Board of India (Sebi) the regulator of commodity spot exchanges is justified and has implications for commodity market agents, participants and other players.
For example, the Forward Markets Commission, the then regulator of commodity derivative markets, had merged with the Sebi in September 2015 after successive deliberations and concerted efforts of the Ministry of Finance and Ministry of Consumer Affairs, Food and Public Distribution. Although the Sebi has great experience in overseeing the capital markets for more than two decades, it does not have much experience in the nuances of the commodities markets.
Apart from the Committees’ elaborate recommendations, the approval of Sebi's authority over commodity spot exchanges should be viewed in the light of the feedback. This would eventually result in consensus in decision-making to firm up legal.
Kushankur Dey Bhubaneswar
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