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Won’t allow commodities derivatives without enough liquidity: UK Sinha

According to Sinha, the markets regulator is considering changes to its consent norms by bringing in a new provision that would enable settling all “insignificant” cases without any “market-wide impact” on payment of certain charges.

By: ENS Economic Bureau |
May 6, 2016 2:49:02 am
SEBI News, SEBI Act, UK Sinha, SEBI Latest New, securities market Sebi Chairman UK Sinha in Mumbai on Thursday. (Source: PTI )

The Securities and Exchange Board of India (Sebi) chairman, UK Sinha, on Thursday said the regulator will not bring in new products in the commodities derivative market unless they have enough liquidity.

Sinha said the regulator is continuously reviewing the risk management framework in the commodities segment and it would take a few more months to bring in the mechanism on par with the securities market.

“Price discovery in this country is very complex. For example, the physical market is controlled by the states and there are many obstacles and measures under the essential commodities Act. I am not saying it is good or bad but these are difficulties … and what is the actual stock, what is the actual crop output, such information is not available to us well in time,” Sinha said on the sidelines of Thomson Reuters Risk Summit.

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The problems in the physical market and also the stage of development of warehousing mechanism in the country doesn’t give Sebi the comfort to progress on the same in a big way immediately, Sinha said.

According to Sinha, the markets regulator is considering changes to its consent norms by bringing in a new provision that would enable settling all “insignificant” cases without any “market-wide impact” on payment of certain charges.

Under the consent settlement process, an entity facing a probe by Sebi is subjected to certain fees and restrictions without admission or denial of alleged irregularities, and the regulator thereafter drops its charges and the investigations with a caveat that all disclosures made to it are correct.

“The cases pertaining to serious securities market violations, which may have severe impact on the markets, would be left out of the consent framework. Securities and Exchange Board of India’s intention is that we focus more on serious cases. So we want insignificant cases are taken through this (consent mechanism). Accordingly, we have clarified that to the team, through a guideline … The next stage is that there is demand from experts that Sebi should do this through a regulation. So we will be moving in to introduce such changes for some regulations on that,” he said.

On curbing ponzi schemes in the country, Sinha said that Sebi has taken action against over 250 companies since the launch of Collective Investment Schemes norms. “Since the time we got the powers to deal with such firms, we have been able to stop them from illegally collecting money from small investors,” Sinha said.

Securities and Exchange Board of India is looking into ways to handle risks emanating from high frequency trading (HFT) as well as frame global standards related to this technology. Sebi has come out with some preliminary guidelines on the same, Sinha said.

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