MFs likely to trade in commodities soon

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Sebi initiates talks with the Reserve Bank. Approval may come in a month

Commodities market watchdog Sebi is likely to give mutual funds the go-ahead to trade in commodity markets in a month. The regulator is also in talks with the RBI to allow institutional investors like banks and FPIs to trade in the

segment.

"Mutual funds' participation in commodities derivatives would be the first one to happen among institutional investors," Securities and Exchange Board of India (Sebi) chairman U K Sinha said on Friday and hinted that the move could be implemented in a month.

On allowing participation of banks, alternative investment funds and foreign portfolio investors (FPIs) in commodities, he said SEBI is in active consultation with the Reserve Bank over the issue.

"Our argument with RBI has been, in any case bank's have huge exposure to commodities through the lending programme. We have been asking them to disclose that. Let a beginning be made by the corporates in disclosing that and then you yourself discover there is a need to allow them to hedge also," he told reporters.

"We are at an early stage of dialogue and part of the reason is how comfortable RBI is about the financial health of the bank, so they will also have this as a concern when they take that call," he added.

SEBI started regulating commodity markets after the merger of Forward Markets Commission (FMC) with the regulator in September 2015.

Sinha also said the regulator is seeking legal clarity with respect to options trading in commodities which may require amendments to the Securities Contracts Regulations Act (SCRA) and is also in talks with the finance ministry in this regard.

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