With Broker Integration, SEBI Paves Way For Expansion Of Commodity Client Pool
A stock broker reacts during market hours in a dealing room in Mumbai (Photographer: Prashanth Vishwanathan/Bloomberg News)

With Broker Integration, SEBI Paves Way For Expansion Of Commodity Client Pool

Market regulator SEBI on Thursday released guidelines allowing commodity derivative and stock brokers to operate in both markets with a unified licence, offering them a larger pool of clients.

A broker dealing in the securities markets will be allowed to buy, sell or deal in commodity derivatives without setting up a separate entity and vice versa, the Securities and Exchange Board of India said in a circular. The new norms came after the government amended the Securities Contract Regulations Rules in June this year.

Regulations like these reduce regulatory compliance and paperwork and allow inter-operability of accounts, benefiting both clients and brokers and facilitating the ease of doing business, said Jyoti Rai, associate director of business development and advocacy at Edelweiss Custodial Services.

SEBI’s move also allows the merger of client accounts across stock and commodity derivative markets. With this, client accounts can be transferred from one stock broker to another with the client’s consent, the circular said. So far, clients maintained separate accounts for stock trading and commodity trading. Now, they can trade in stocks and commodities through a single account.

The new norms will be positive for commodity exchanges, allowing stock brokers and clients access to commodity derivative markets, said a senior executive at country’s largest commodity stock exchange MCX. This will eventually increase liquidity, the executive said.

Mutual funds, banks and financial institutions and foreign investors are restricted from trading in commodity exchanges. SEBI has been in talks with the Reserve Bank of India to allow institutions in commodity exchanges.

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