In its expanded role as regulator of the commodities derivative market, Sebi is working on a robust mechanism to ensure fair price discovery of agri products and curb excessive speculative activities.
The regulator has already sought help from the Ministry of Agriculture with regard to the physical market price data sources and for improving the methodology for determination of final settlement price.
Sebi's focus is to ensure that derivatives trading is used as a hedging instrument by farmers and others in the commodities marketplace against seasonal and unforeseen price fluctuations rather than for creating speculative bubbles to make quick money, a senior official said.
There have been demands from some sections to stop derivatives trading in certain commodities, while there are other lobby groups that want more agri products to be allowed for futures and options trading.
Asserting that Sebi would not be swayed by any of the lobbying efforts, the official said that the regulator is hearing out all the sections but remains focussed on ensuring that the derivatives trading becomes a facilitator in a fair price discovery rather than becoming a tool to generate speculative profits.
Sebi is of the view that the robustness and sanctity of final settlement price is crucial to the success of derivative markets, he added.
The regulator also plans to enhance its interactions with the farmers' groups, agriculture sector business associations, agri-economists and others to create 'vibrant and speculation-free' derivatives trading in agriculture commodities, the official said.
The Forward Markets Commission (FMC), the erstwhile regulator for commodities derivatives market for over 60 years, was merged with Sebi on September 28 to create a unified watchdog.
Sebi has already put in place necessary organisational structures for its expanded role.
The newly created Commodity Derivatives Market Regulation Department (CDMRD) consists of four different divisions -- Division of Risk Management and Products (DRMP), Division of Exchange Inspection and Complaints against Exchanges (DEICE), Division of Market Policy (DMP) and the Division of Exchange Administration (DEA).
The merger was effected to strengthen and streamline the regulatory framework to curb manipulations in the commodities derivatives segment.
"Farmers, producers and consumers need to have confidence that derivatives market is free from manipulations and market abuses. I am sure that Sebi would be successfully able to handle additional responsibility entrusted to it," Finance Minister Arun Jaitley had said at the time of the merger.
