The Securities and Exchange Board of India (Sebi) and the Forward Markets Commission (FMC) have reached an understanding that the capital markets regulator will not clear any more commodity asset-based exchange traded funds (ETFs) till they sort out their disagreement over who should regulate the product.
At present, ETFs come under Sebi’s purview.
The FMC, which is the regulator for the commodity futures markets, has argued that it has the right to regulate gold and silver exchange traded funds since the underlying asset is a commodity which comes under its bailiwick.
FMC chairman B.C. Khatua told reporters here today that the two regulators had agreed to resolve their differences through dialogue.
Khatua said approvals that had been granted to some fund houses over certain commodity-based ETFs had now been put on hold.
“In the larger interests of investors, both of us have agreed that other ETFs (gold, silver) will be allowed only when the issue is resolved,” he said.
Recent reports have indicated that several mutual funds were keen to float silver ETFs to take advantage of the surge in silver prices in the past 18 months.
The differences between Sebi and FMC have been brewing for close to a year, fuelling another turf battle between regulators.
Last year, Sebi and the Insurance Regulatory and Development Authority (IRDA) had locked horns over unit-linked insurance products (Ulips).
The National Stock Exchange was also forced to defer the launch of derivatives based on gold exchange traded funds as the FMC had raised objections. The regulator for commodity futures market had objected on the ground that options were not allowed in commodities.
Some of the issues that figured in today’s meeting of the FMC with members of the national commodity exchanges were the introduction of mini contracts in agricultural commodities, standardisation of know-your-client (KYC) agreements across exchanges, and extra delivery centres for bullion contracts. Exchanges also wanted to put a halt to trading on Saturdays.
The total value of trade in Indian commodity futures market during 2010-11 stood at Rs 119.49 lakh crore.
The market registered a growth of 54 per cent during the year compared with Rs 77.65 lakh crore in the previous year.
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