We will ensure no major divergence in physical and derivatives markets: U K Sinha

On immediate plans post the merger of FMC...

Sebi will ensure that regulation of the derivative commodity market is strong. We will give those in commodity trading some time so that they meet the requirement of Sebi. We will concentrate on risk management. Sebi will also ensure there is no major divergence in physical and derivatives markets. We will take number of measures to develop the derivative commodity market, so that commodities exchanges will also start doing work with regard to the securities markets. Similarly, those participants who are today not allowed to participate in the commodity derivatives market, will be permitted to trade. Products which are not being allowed today will be also allowed. What we want on Day 1 is to ensure a smooth transition. We are reasonably assured about our capacity to regulate in a few months.

On Sebi's framework in longer terms...

On long-term basis, we will like to ensure that the correct signals are given by the market, by the regulator, so that a farmer or a consumer can decide and plan how much sowing should he do, and when should he start marketing his products. So our signals should be helping him in hedging his risk. We also wants in commodity market, where India is a very dominant player, we should not be a 'price taker', we should be setting the market rates, we should be 'price makers'. For instance, in commodities like gold and petroleum products, India should be setting the price.

On Sebi changing regulations for listing stock exchanges...

The existing regulation, which is called the stock exchange and clearing corporation regulations, does provide the listing of stock exchanges. There are certain conditions that they should be complied, we do not allow self-listing. We wanted to be sure and everybody in the market to be sure that how many exchanges are going to be functional. You allow a security exchange to get listed and tomorrow there are three other exchanges that are coming through this route of merger, then it is a bad signal for investors. So we were waiting for this. We are also trying to fine-tune some of our requirements. But Sebi is not against listing of exchanges. We will be coming out with some more guidelines. Once the regulations are in place, we will allow listing of exchanges.

On shrinking brokers' net worth of the commodity exchanges and looking alternatives of business...

Brokers today in the securities market cannot have any other major business in the same entity. They are permitted to open separate entity and do the rest of the business, and that will be our guidelines. If there are some brokers in the commodities futures markets, commodity derivative markets and those brokers have an entity which is allied to the main securities market, we will have a mechanism through which both of their activities can be merged. The idea is to give more efficiency. But somebody tries to open an entirely different business not dealing with securities nor commodity futures, and a third business that obviously is not envisaged in the main entity, they can do it.

On challenges ahead...

Merger of business entities is very common in India and outside, but you will perhaps find very few example of a merger of regulatory entities. There are have been new entities created where the past work has been handed over to them. For instance, in insurance, you had a regulatory authority. Sebi itself was created that way. But merger of two fully functional regulatory entities is rare and is very challenging. However I would like to assure everybody that because it is tough, we will be very cautious. That is why I again emphasise that if the choice is between developing the market in big way or taking good regulatory measures so that everybody has the confidence and the trust in the regulatory environment, we will go for the second one. Our immediate task will be to regulate properly and assure ourselves that we are in the control of the situation and are not missing out anything. Then, we will go for the development. However, it will take few months.

On Sebi's lookout on role of commodity warehouses...

The right way to appreciate this is that Sebi has to ensure physical delivery of some commodities. Whatever mechanism is required to ensure the physical delivery takes place in a very concrete manner.

On Sebi's roadmap and infrastructure development for physical deliveries in commodities post GST rollout?

Sebi will not have the physical market for the agriculture produce. However, we would like to develop the national electronic market. Though there will be no direct responsibility of Sebi in it, but we will work with state and central governments on its development. Despite this, high and good quality delivery and moreover assured delivery is the requirement for this market which we will do.

On Aadhar card for KYC

Aadhar card is sufficient documents for KYC. It is like proof of residence and identity. However, despite this, other documents are equally valid and the KYC process will go the way it was earlier.

On Sebi's stand on the investigation on NSEL scam

Sebi has taken over today. We are not in a position to comment right away on this. We will take stock of things, and then will take view on each and every matter.

On timeframe for foreign portfolio investor in the commodity market?

As I said, our immediate task is to ensure that we are in full control of the situation, regulatory environment is well in place. I believe that it will not take more than few months, am not talking about a frame work of years. FPI, which is a developmental part, should take place in a matter of months.