Market regulator Securities and Exchange Board of India (SEBI) has decided to grant a unified licence to brokers and clearing members to operate in commodity derivative as well as equity markets.
A broker or clearing member dealing in the securities markets will now be allowed to buy, sell or deal in commodity derivatives without setting up a separate entity and vice versa.
The decision was taken at SEBI’s board meeting—the first under newly-appointed chairman Ajay Tyagi—on Wednesday.
The move follows Finance Minister Arun Jaitley budget speech in February this year that highlighted possible measures to integrate commodities and securities markets participants, brokers and operational framework.
“The integration of stock brokers in equity and commodity derivative markets while having many synergies in terms of trading and settlement mechanism, risk management, redressal of investor grievances, etc would benefit investors, brokers, stock exchanges and SEBI,” the regulator said.
Besides, it will increase economic efficiency in terms of meeting operational and compliance obligations at the member level, potentially resulting in ease of doing business. The integration will also help in widening market penetration and facilitate effective regulatory oversight by stock exchanges and SEBI, the regulator said.
SEBI will amend norms pertaining to stock brokers and Securities Contract (Regulations) to introduce options trading in commodity markets.
“To enable the commodity derivatives exchanges to organise trading of ‘options’, the board has approved a proposal to amend the relevant provisions of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012. Detailed guidelines for trading in ‘option’ on commodity derivatives exchanges will be issued later,” the regulator said.
Re-enacting another budget proposal, SEBI allowed the inclusion of ‘systematically important’ non-banking financial companies (NBFCs) already registered with the Reserve Bank of India (RBI) when investing in public issues such as initial public offerings (IPOs).
NBFCs will be categorised under qualified institutional buyers (QIBs) which till date comprised banks and insurance companies under SEBI’s ICDR (issue of capital and disclosure requirements) guidelines.
“The board approved the proposal for inclusion of systemically important NBFCs registered with RBI having a net worth of more than Rs 500 crore in the category of QIBs. As NBFCs are well-regulated entities, classifying such NBFCs under the definition of QIBs will give Issuers access to a larger pool of funds,” SEBI said.
The capital markets regulator also called for stronger monitoring of funds raised via public issues, excluding offer for sale (OFS). SEBI has now reduced the limit to Rs 100 crore when appointing a monitoring agency against the earlier limit of issues worth Rs 500 crore.
“The purpose for the same is to ensure adequate supervision of the utilisation of the funds raised. The frequency of submission of monitoring agency report has also been enhanced from half-yearly to quarterly,” SEBI said.
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