Home / Market / Stock-market-news /  Timeline of commodity derivatives market reforms after Sebi-FMC merger

Exactly a year ago, the government announced the merger of the Securities and Exchange Board of India with the Forward Markets Commission to have a unified regulator for equity and commodity markets. In the months since, Sebi has announced a slew of reforms in the commodity derivative markets. Here’s a look at the journey:

29 September 2015: Sebi introduces new eligibility and net worth norms for registration of members of commodity derivatives exchanges. The norms were made similar to those required for dealing in equities and all members were required to meet the eligibility criteria by 28 September 2016.

01 October 2015: Sebi introduces tighter risk management framework for national commodity derivatives exchanges in terms of assets to set up an exchange, margin requirements, net worth criteria, base minimum capital, settlement guarantee fund and so on . The norms were made similar to those required by equity exchanges and were supposed to be implemented by 01 January 2016.

21 October 2015: Sebi introduces separate risk management norms for regional commodity derivatives exchanges.

26 November 2015: Sebi issues timelines for all commodity exchanges to comply with various requirements of Securities Contract (Regulations) Act, including norms on corporatization and demutualization, clearing and settlement, regulatory fee, net worth, ownership, governance, formation of various exchange-level committees, delisting, dematerialization of securities and so on.

9 December 2015: Sebi directs commodity bourses to submit monthly development reports, starting from April 2015.

11 January 2016: Sebi introduces exit norms for commodity bourses.

29 January 2016: Sebi reduces both overall position limit and near month open position limit both at client and member level for agricultural commodities.

17 March 2016: Sebi allows trading in commodity derivatives at International Financial Services Centres (IFSC). Stock exchanges operating in IFSC permitted to deal in commodity derivatives.

29 March 2016: Sebi introduces tighter cyber security and cyber resilience framework for commodity bourses to improve governance, protection and monitoring standards among others. The new norms will be effective from 01 January 2017. Sebi also orders for modification of client codes post execution of trades on any commodity exchange.

25 April 2016: To enhance transparency in the dealings between stock brokers and clients in commodity derivatives market, Sebi orders regular compulsory disclosure of proprietary trading by commodity brokers to their clients.

11 August 2016: Sebi mandates annual system audit of stock brokers and trading members of national commodity derivatives exchanges, somewhat similar to that in the equity space.

19 August 2016: To facilitate larger participation in the commodities market, Sebi allows exchanges to offer incentives to hedgers and grant hedge limits to their members and clients in addition to the normal position limit allowed to them.

30 August 2016: Sebi directs commodity bourses to disseminate derivatives prices through SMS or any other electronic medium (instant messengers, email, etc.) for all commodities to the subscribers on a daily basis free of cost.

02 September 2016: Sebi directs exchanges to adopt stronger spot price polling mechanism for commodities and enhance disclosures related to such mechanism.

7 September 2016: Sebi stipulates first trading day limit and daily price limits for trading in non-agri commodity derivatives.

20 September 2016: Sebi prescribes tighter norms for commodity futures to be eligible to be traded on exchanges on a continuous basis. Stricter norms with regards to modification of contracts introduced to prevent abrupt changes in contract terms or sudden discontinuation of futures contracts. Sebi orders exchanges not to modify anything in a continuously trading contract without prior information and a Sebi approval.

26 September 2016: Sebi strengthens investor protection fund norms for commodity bourses.


Anirudh Laskar

Anirudh Laskar is a senior editor at Mint, with 17 years of experience. He has reported on significant corporate matters including large mergers and acquisitions, India's emerging e-commerce sector and regulatory issues in the financial services industry. Based out of Mint’s Mumbai bureau, Anirudh has worked with Business Standard and The Telegraph before joining Mint in 2009.
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