SEBI Directs Bourses Dealing In Commodity Derivatives To Form Advisory Panel

Securities and Exchange Board of India directed stock exchanges dealing in commodity derivatives segment to constitute Product Advisory Committee so as to bring transparency in the designing process of commodity derivatives contract.

The committee has to be constituted for “each group or complex of commodities having common stakeholders/value chain participants, on which derivatives are traded or being proposed to be traded on the exchange,” the regulator said in a circular.

The move is aimed at catering to the needs of the physical market participants and is based on the advice of the commodity derivatives advisory committee, it added.

Consultation of the committee can be taken in matters related to contract design of new commodities and review of design of existing contracts, performance review of the existing contracts on various parameters among others, SEBI noted.

Additionally, PAC can also be consulted for recommendations on delivery centres.

However, exchanges reserve the right to accept, reject or modify recommendations of the PAC, by “recording the reasons thereof”.

On composition of PAC, SEBI said the committee is required to have a balanced representation from amongst the categories of stakeholders mentioned by the regulator and the committee shall meet at least twice a year and more frequently as and when required.

Besides, the exchanges have been directed to make certain disclosures related to each PAC on their website.

Also, SEBI said “there should be an annual review of the PAC's performance by the Regulatory Oversight Committee of the stock exchange.”