MFs' entry in commodity derivatives to set stage for more commodity ETFs

MCX suggests Sebi to allow gold funds to buy futures instead of physical metal

As the route opens up for mutual funds to participate in commodity derivatives, the stage will be set for extending the process to commodity exchange-traded funds (ETFs).

The Multi-Commodity Exchange (MCX) has proposed to the Securities and Exchange Board of India (Sebi) to allow exchange-traded funds in commodity derivatives. Sebi is finalising changes to Mutual Funds Regulations, allowing them formally in commodity derivatives. 

ETFs are run by mutual fund management companies and hence while allowing MFs, the regulator should also allow ETFs. At present, only gold ETFs deal in physical gold. Other ETFs have stocks or indices as underlying assets.