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Investors could soon get to trade in commodity, weather-based indices

Economic Times:  October, 2015

Mumbai: Traders, rich investors and hedgers could get to trade in commodity and weather-based indices, akin to Nifty and Bank Nifty in the equity segment, in a matter of months. In a move to deepen the decade-old commodity futures market, its new regulator Sebi is studying how this could change the trading landscape. 

"We are studying the commodity market. Our initial sense is that it is a shallow market. We would like it to be deepened like the equity market, where introduction of demat accounts and online trading were the game changers. We are identifying what these (game changers) could be for the commodity markets," a senior Sebi official told ET. 

"For the next (few) months, we are looking at introducing index-based trading for the commodities market, similar to the equities market. We will subsequently turn our attention to deepening participation by opening up the market to institutional players like mutual funds and banks. But our priority now is for a new product," he added. 

The government brought the commodity futures market under the ambit of Sebi a month ago by merging its erstwhile regulator Forward Markets Commission (FMC) with the Sebi. Currently, the registration of broker-members of exchanges like Kotak-led MCX and NSE-helmed NCDEX is under way. The process will be completed by November-end. Alongside completion of registration, the regulator has been engaging with exchanges and brokers on how to deepen the market. It has formed a panel comprising brokers  .. 

Confirming this, a top broker, who is on the exchange panel, said, "Indices based on metals, energy and farm futures are in the works. Once these are ready for launch, the market could gradually be opened up to institutional participants who can act as effective counterparties to hedgers." Currently, the market is dominated by retail processors, stockists and traders, speculators and a few large hedgers like Titan, Louis Dreyfus, Cargill India, Adani Wilmar.