Sebi for allowing banks, insurers, pension funds to invest in non-agri commodity derivatives: Chief Tuhin Kanta Pandey

Sebi will “engage” with the government to allow banks, insurance companies and pension funds to invest in non-agriculture commodity derivative markets, its chairman Tuhin Kanta Pandey said on Wednesday.

He said the capital markets regulator is also looking at a proposal to allow foreign portfolio investors to trade in non-cash settled, non-agricultural commodity derivative contracts.

“We will also engage with the government to consider banks, insurance companies and pension funds to trade in these (non-cash, non-agricultural) markets,” Pandey said, while speaking at the event organised by MCX.

By December-end, Sebi will include commodity-specific brokers in a common reporting mechanism for compliance reports, Pandey pointed out.

Stating that commodity derivative markets play a very important role for the economy, Pandey said India aspires to be the “price-setter” instead of being a “price taker” at the global level.

There is a need to look at how to broaden the acceptance of Indian benchmarks at home and abroad, he said, stressing that in volatile times like the current one, the exchanges can act as a good tool of price insurance and help protect profit margins.The career bureaucrat-turned-securities regulator specifically pointed out that the recent doubling of tariffs on aluminium and copper imports by the US “directly affects” India’s export landscape.”In such a volatile environment, a robust derivatives market provides a powerful shield, allowing Indian producers and consumers to hedge against global price shocks,” Pandey said.

He said the market becomes very essential in the case of critical minerals like lithium, cobalt, nickel and rare earth elements, which are building blocks of green energy and posed a challenge.

“What can our markets do as India pursues its goal of self-reliance in critical minerals? Can we develop financial instruments that help finance and de-risk the exploration and mining of these vital resources?”

Affirming that Sebi will continue to strengthen the integrity and safety of commodity markets, Pandey underlined that real-time margin collection and continuous monitoring are “non-negotiables” for the regulator.

Strengthening India’s commodity markets is “high” on Sebi’s regulatory agenda, he said, listing out some measures in this regard.

It has already constituted a committee to recommend measures for deepening the agriculture commodity segment, Pandey said, adding that the watchdog will also constitute a working group for developing the non-agricultural commodity space, including metals.

The regulator’s comments led to buying on the MCX’s counter, and the price per share closed 3.51 per cent up at Rs 7,919.45 apiece on the BSE against a 0.38 per cent gain on the benchmark.