Skip to main content

Regulator mulls single licence for equity, commodity brokers

By
The Securities and Exchange Board of India (Sebi) is working on a plan to allow a single licence for equity and commodity brokers, a move that will help the broking community reduce costs.
Though both security and commodity market intermediaries are now regulated by Sebi, following the absorption of Forward Markets Commission (FMC) into it, they still adhere to different guidelines and requirements. Sebi has initiated an exercise to have a common set of these.
“Once the commodity market stabilises, we will allow each lot of brokers to operate in the other segment. It will be done in a gradual and phased manner, so the market isn’t disrupted in any way,” a senior Sebi official told this newspsper.
The issue has been discussed in several meetings after the FMC merger in September. Experts say the move will bring down the cost of operations for brokers, under pressure due to shrinking margins. High costs and moderation in growth has led to nearly 3,000 shutting shop in the past eight months, according to Sebi data.
"The move will certainly be helpful for both investors and market participants. It will allow investors to utilise their funds in a more efficient manner, protect against downside risk and security in knowing that even if part of your portfolio is in decline, the other might still show profits,” said Kishore Narne, associate director and head of commodity and currency at Motilal Oswal.
Once it gets implemented, investors can get a common contract from the entities which include commodity business. Perhaps also a common registration number for all exchanges, unlike now. Sebi is keen on bringing more depth into the commodities trade.
“Undoubtedly an investor-friendly move,” said Alok Churiwala, vice-chairman, BSE Brokers Forum.
However, certain irritants will have to be removed to make the proposal a reality, say experts. One would be the minimum net worth criterion for brokers, currently between Rs 25 lakh and Rs 3 crore, depending on the exchange. Net worth is the amount a broker keeps with an exchange, based on a formula prescribed by the J R Varma committee. It was set up by Sebi in 1998 to provide a method for fixing the initial margin on index futures contracts, and prescribes liquid net worth requirements for participants, from clearing members to trading members.
“To resolve the issue, the brokerage house can be asked to pay the net worth based on the market size of that particular entity, whichever is higher,” said a former Sebi official on the condition of anonymity.
Another issue could be shareholding at brokerages as a result of bringing commodity and securities businesses under one entity.
STREAMLINING
  • Sebi plans to allow single licence for equity and commodity brokers
  • New guidelines likely to be in place after September
  • Securities brokers who have memberships of commodity futures will benefit
  • The plan to create one market, one regulation for equity and commodity brokers
  • Brokers may have common registration numbers for all exchanges
  • Net worth criterion would be tweaked depending on the market size of the entity
  • This will reduce duplication, cost of transaction and compliance
  • The regulator is working on the plan since it got merged with FMC last year
Business Standard New Delhi, 12th April 2016

Comments

Post a Comment

Popular posts from this blog

Household debt up, but India still lags emerging-market economies: RBI

By
  Although household debt in India is rising, driven by increased borrowing from the financial sector, it remains lower than in other emerging-market economies (EMEs), the Reserve Bank of India (RBI) said in its Financial Stability Report. It added that non-housing retail loans, largely taken for consumption, accounted for 55 per cent of total household debt.As of December 2024, India’s household debt-to-gross domestic product ratio stood at 41.9 per cent. “...Non-housing retail loans, which are mostly used for consumption purposes, formed 54.9 per cent of total household debt as of March 2025 and 25.7 per cent of disposable income as of March 2024. Moreover, the share of these loans has been growing consistently over the years, and their growth has outpaced that of both housing loans and agriculture and business loans,” the RBI said in its report.Housing loans, by contrast, made up 29 per cent of household debt, and their growth has remained steady. However, disaggregated data sho...
Post a Comment
Read more

External spillovers likely to hit India's financial system: RBI report

By
  While India’s growth remains insulated from global headwinds mainly due to buoyant domestic demand, the domestic financial system could, however, be impacted by external spillovers, the Reserve Bank of India (RBI) said in its half yearly Financial Stability Report published on Monday.Furthermore, the rising global trade disputes and intensifying geopolitical hostilities could negatively impact the domestic growth outlook and reduce the demand for bank credit, which has decelerated sharply. “Moreover, it could also lead to increased risk aversion among investors and further corrections in domestic equity markets, which despite the recent correction, remain at the high end of their historical range,” the report said.It noted that there is some build-up of stress, primarily in financial markets, on account of global spillovers, which is reflected in the marginal rise in the financial system stress indicator, an indicator of the stress level in the financial system, compared to its p...
Post a Comment
Read more

Healthy balance sheets augur well for economy: RBI Governor Sanjay Malhotra

By
  Large tariffs by the United States administration and elevated geopolitical risk have increased near-term global financial stability risks, and along with weather events pose downside risks to domestic growth, Reserve Bank of India(RBI) Governor Sanjay Malhotra said in the foreword to the Financial Stability Report released today.Noting that domestic growth momentum is buoyed by strong domestic drivers, sound macroeconomic fundamentals and prudent policies, Malhotra said: “External spillovers and weather-related events could pose downside risks to growth.”On the other hand, he said the outlook for inflation is benign, and there is greater confidence in the durable alignment of inflation with the Reserve Bank’s target.Commenting that the structural shifts reshaping the global economy are making policy intervention challenging, the Governor emphasised the need for central banks and financial sector regulators to remain vigilant, prudent and agile in safeguarding their economies and...
Post a Comment
Read more