Sebi permits convergence of stock, commodity exchanges; to be effective from Oct 2018
Sebi's move will allow major players like BSE, NSE to introduce commodity-backed financial instruments on their platforms, while MCX and NCDEX will be allowed to list equities and equity F&O
The Securities and Exchange Board of India (Sebi) on Thursday gave its nod to the convergence of both equities and commodity-backed stocks on exchanges from October 2018.
The decision taken at the Sebi's Board Meeting was announced by the regulator's Chairman Ajay Tyagi.
Tyagi said the convergence will be effective from October 2018 and will help in cross-listing and provide investors with access to various asset classes.
The move will allow major players like BSE, NSE to introduce commodity-backed financial instruments on their platforms, while MCX and NCDEX will be allowed to list equities and equity F&O.
The Union Budget 2017-2018 had proposed to further integrate commodities and securities derivative markets. The integration has been achieved in two phases.
"... The board approved the proposal to remove the restrictions by making suitable amendments to Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporation) Regulations, 2012 ("SECC Regulations"). The amendments to the SECC Regulations would be effective from October 1, 2018," the regulator said in a statement.
According to Deepak Jasani, Head, Retail Research, HDFC Securities: "The move will allow bourses like the NSE and BSE to launch commodity products on their platforms."
"This convergence will help an individual to have one account to trade in all asset classes. SEBI is also looking to simplify and rationalise norms for REITs (real estate investment trusts). SEBI Chairman said that the securities receipts can now be listed and traded on stock exchanges," Jasani told IANS.
The decision had a mixed impact on the scrip of listed stock and commodity exchanges. Shares of BSE closed on a higher note at Rs 944 per share -- up Rs 33.05 or 3.63 perAcent.
In contrast, scrip of MCX closed 5.55 percent lower at Rs 938.55 per share.
On its part, BSE welcomed Sebi's decision to allow convergence of stock and commodity exchanges.
"BSE believes this decision will help participants in various markets a highly regulated, safer, more transparent trading, clearing and settlement framework when implemented fully," said BSE's MD and CEO Ashishkumar Chauhan.
"BSE has geared up itself for long to provide these facilities to its more than 3.71 crore registered investors."
Angel Broking's Head Advisory Amar Singh said: "The move is expected to broaden the markets and this key reform will go a long way in developing the Indian financial markets in years to come."
Sebi in its last Board meet for 2017 also enhanced eligibility requirement for CRAs (Credit Rating Agencies), restricted crossholdings amongst them and added provisions for withdrawal of their ratings among others.
Ratings agency CRISIL said that Thursday's decision will raise industry standards and deepen the corporate bond market in India.
Higher minimum net worth requirements for CRAs and increased shareholding requirements along with minimum holding period for promoters of CRAs will ensure that only serious and credible players with long-term perspective enter the field, CRISIL said.
CRISIL's Managing Director and CEO Ashu Suyash said: "The higher net worth requirement will encourage CRAs to invest in intellectual capital and build quality infrastructure, thereby paving the way for a world-class industry. The guidelines around threshold for promoter holdings for a minimum period of three years will ensure greater commitment from promoters setting up CRAs."
Besides, Sebi eased the access norms for investment by Foreign Portfolio Investors (FPIs) and warned against "insider trading" .
In addition, the regulator issued norms on shareholding, governance of mutual funds and allowed listing of security receipts issued by Asset Reconstruction Companies.
For full coverage of Union Budget 2018, click here.
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"The domestic markets are volatile, but they are globally volatile too. Our risk management economics are in place and manipulators will not be allowed to take advantage," SEBI chairman Ajay Tyagi said