Regulator Takes Steps to Restore Investor Confidence in Commodity Bourses
To revive investor confidence in the commodities market that has plummeted after a Rs 5,600 crore payment crisis at National Spot Exchange Ltd (NSEL), the Forward Markets Commission (FMC) has asked the Securities and Exchange Board of India (Sebi) to make it mandatory for listed companies to disclose their exposure in commodities hedging.
Commodity market regulator FMC has also written to the Finance Ministry to direct banks to insist on borrowers who have exposure to commodities, hedging their price risks.
"Trading volumes are declining on all commodity exchanges as investor confidence was shaken after the NSEL payment crisis surfaced. We are taking measures to address this issue," FMC Chairman Ramesh Abhishek told PTI.
"We have written a letter to the SEBI to make it mandatory for listed companies to disclose their exposure in commodities hedging," he said.
"A separate letter has been written to the Department of Financial Services to direct banks to insist borrowers to hedge their price risk in commodities."
Mr Abhishek said that sharing information about exposure in commodities hedging will give confidence to smaller companies to hedge on the exchange platforms, thereby rebuilding trading volumes in the domestic commodity markets.
Currently, hedging in Indian commodity bourses is taking place on a very small scale with scope for development. The companies hedge in commodities to offset risks arising out of fluctuations in raw-material prices.
Trading volumes at the commodity exchanges have fallen sharply ever since the the Rs 5,600 crore payment default came to fore at NSEL, a spot exchange run by promoters of the MCX - the country's largest commodity bourse.
As per FMC data, the turnover of the commodity exchanges has nearly halved to Rs 4.64 lakh crore in April this year, from Rs 8.68 lakh crore in August 2013 when the NSEL crisis came to light.
Subsequently, a national level exchange - ICEX - had to fold its operations due to a sharp drop in trading volumes. Besides the NSEL fiasco, the imposition of commodity transaction tax (CTT) also led to fall in volumes.
At present, there are 15 commodity bourses in the country, of which MCX, NCDEX, NMCE, ACE and UCX operate at national level.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
