SEBI Allows Convergence Of Equity, Commodity Exchanges From October 2018

From October 2018, both equities and commodity-backed stocks can be traded on exchanges as Sebi gave its nod

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SEBI Allows Convergence Of Equity, Commodity Exchanges From October 2018

SEBI chairman Ajay Tyagi said the convergence will help in cross-listing of equities and commodities


Mumbai: The Securities and Exchange Board of India (Sebi) recently 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 said: "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 said.

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 per cent. In contrast, scrip of MCX closed 5.55 per cent 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.


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