Sebi plans to integrate market intermediaries

The Securities and Exchange Board of India (Sebi) is considering rule changes to allow integration of market intermediaries like brokers in the derivatives markets, before integrating the exchanges for allowing commodities and equity/ currency on single platform.

The current Sebi regulations do not permit an equity exchange to trade in commodities and vice versa.

Separate exchanges, therefore, are required to offer trade in different financial segments.

Similarly, market intermediaries like brokers are required to float separate entities for facilitating trade in equities/ currencies and commodities.

ASebi source said, “We are weighing integration of brokers and other intermediaries to facilitate trade under one umbrella in all segments and financial instruments.

Once, integration of intermediaries is complete, we would consider integration of exchanges.” Market participants have made several representations to the regulator, seeking integration of all segments, especially equity/ currency and commodities, under one entity.

Following the success of the Multi Commodity Exchange and the National Commodity &Derivatives Exchange (NCDEX), equity trading platform BSE has proposed to set up its own commodities trading arm.

The exchange has already set upacommodity experts´ team to initiate preparations.

National Stock Exchange (NSE) is holding 15 per cent stake, the maximum an equity exchange can have in any commodity exchange, in NCDEX.

Participants argue that integration of brokers would help clients.

“There are separate requests for transfer of margins from one segment to another by clients onaregular basis.

In the process,aclient in many cases fails to use margins to the full extent in one segment, while receiving separate margin calls from another segment of the trade.

Sometimes, clients´ positions are cut automatically for insufficient margins in one segment, despite having sufficient balance on the other.

Following the integration, such problems would disappear.

For brokers, compliance cost would also decline significantly.

Even audit of all accounts would be done together, which will benefit brokers,” said Shiv Kumar Goel, president, Commodity Participants Association of India.

Apart from brokers, the regulator is looking at integrating other intermediaries in the value chain but later. The Sebi source said, “We are working on integration of members first, which would take some time for the actual implementation.”

Business Standard New Delhi,16th Feburary 2017