Nearly seven months after taking over as the commodity market regulator, the Securities and Exchange Board of India (Sebi) has started issuing the first set of registrations for commodity brokers.
While official data shows that 144 entities have been registered as brokers in the commodity derivatives segment as on March 31,
Sebi officials say more than 400 entities have been granted registration to function as commodity brokers till date.
This is the first time that the capital markets regulator has disclosed data on the number of registered brokers in the commodity segment. There are nearly 3,200 registered brokers in the cash segment of the equity market.
“Post the merger of the FMC (Forward Markets Commission) with Sebi in September, commodity brokers were given three months’ to submit their applications for Sebi registrations. Nearly 1,500 applications were received,” said a person familiar with the matter. who declined to be identified as he is not authorised to speak to the media. “Almost all the existing members of commodity exchanges applied for membership and approvals are being given post the required scrutiny. All the applications will be processed in the next couple of months,” he added.
Brokers, however, say that the first set of approved entities mostly include the smaller players with standalone commodity broking business and no equity segment exposure. “We believe the initial lot includes those that do not have multiple market exposure since known names have not yet talked about getting Sebi registration,” said the chief of a south-based commodity brokerage. He has also applied for registration that is yet to be approved. “It is a matter of time before Sebi processes all the applications. The papers have already been vetted by the commodity exchanges and so we do not expect any issues related to compliance, etc,” he said.
Most large, well-known broking entities like Edelweiss Financial Services, Motilal Oswal Financial Services, IIFL, Angel Broking, ICICI Securities and Kotak Securities among others have equity and commodity arms.
Prior to the FMC-Sebi merger, such brokerages had to form two separate companies to function in the commodity and equity markets due to the presence of two separate regulatory bodies.
In the Union Budget for 2015-16, the government proposed the merger of FMC with Sebi to “strengthen the regulation of the commodity forward market and reduce wild speculation”.
The merger was formally notified on September 28, 2015.
The government move followed the Rs 5,575-crore settlement scam at the National Spot Exchange Ltd (NSEL). After the scam became public on July 31, 2013, the government in September 2013 moved the erstwhile FMC from the Consumer Affairs Ministry to the Finance Ministry.
The FMC-Sebi merger was also one of the recommendations of the Financial Sector Legislative Reforms Commission, which was formed to look into possible areas of reforms for financial sector regulations.