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.
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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.
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“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.