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Ready to regulate commodity trading, Sebi has cautioned small investors against entering this market for quick gains through speculation, which is "risky" and requires a lot of technical expertise.
"People will come and tell you that with a small margin, you can make a lot of money. Do not fall into the trap," Sebi Chairman U K Sinha said, even as he asserted that the capital markets watchdog was fully prepared to begin regulating commodities trading and all necessary safeguards would be put in place to keep scamsters and manipulators at bay.
Sebi, which expects the merger of commodities market regulator FMC with it to be completed by next month, will soon put in place a new set of regulations for this segment and the restrictions, including for trading lot sizes, would also be implemented to ensure safety of small investors.
Sinha said his message to the small investors would be to keep away from the commodities market as it was meant for the experts and for those seeking to hedge their risks.
Announced by Finance Minister Arun Jaitley in his Budget for 2015-16, FMC's merger with Sebi will help streamline regulations and curb wild speculations in commodities market, while facilitating participation of domestic and foreign institutional investors and launch of new products.
The commodities market has been known to be more prone to speculative activities compared to the stock market, while illegal activities like 'dabba trading' have also been more frequent in this segment.
Besides, the high-profile NSEL scam rocked this market in the recent past and the subsequent regulatory and government interventions in this case eventually led to the government announcing FMC's merger with Sebi.
At present, there are three national and six regional bourses for commodity futures in the country. Together, all the exchanges clocked a turnover of nearly Rs 60 lakh crore in 2014-15, from over Rs 101 lakh crore in the previous fiscal.
Asked about Sebi's preparedness for regulating the commodities market and his assurance to investors, Sinha said Sebi has got more than 15 years of experience of managing and regulating derivatives trading.
"Since 2000, derivatives in stocks have been present in our county and Sebi has been regulating it. Later, currency derivatives were also introduced, which we are also regulating. Our belief is that commodities derivatives regulation will not be a problem," said Sinha.
