SEBI starts discussion on portfolio management services in commodity market

People look at a screen displaying India's Finance Minister Arun Jaitley presenting the budget, on a facade of the Bombay Stock Exchange (BSE) building in Mumbai, India, February 29, 2016. The government unveiled a budget for the poor on Monday, announcing new rural aid schemes and skimping on a bank bailout, in a strategy shift that seeks to boost Prime Minister Narendra Modi's ruling party in coming state elections. REUTERS/Danish Siddiqui - RTS8IIY

After laying out the rules for the introduction of commodity options in June, the Securities and Exchanges Board of India (SEBI) is now moving toward the second phase of its plan to deepen commodity markets.

The capital markets regulator has now started discussing the introduction of portfolio management services (PMS) in the commodities market with brokers.

Toward that end, brokers will meet with an exchange on Tuesday and discuss possible ways of introducing PMS. The exchange had sought suggestions about the same from brokers and will now meet with them to discuss the possibilities.

Following this meeting, brokers and exchanges will meet SEBI officials next week to put forth their suggestions about introducing PMS in the commodity market.

SEBI has been actively working towards deepening India's commodity market in the country for some time now. A source close to the development told Moneycontrol, “After giving approval of option in commodities and Alternative investment fund category 11 had been allowed in the past. Now it is time for PMS allowance for commodity market”.

The commodity market has received more recognition ever since it came under SEBI's purview in 2015. The capital markets regulator has been working on introducing portfolio management services and allowing mutual funds to participate in the commodity market.

The Association of Mutual Fund of India (AMFI) submitted its report on mutual funds investing in the commodity market after discussing with asset management companies.

SEBI itself is in discussions with the Reserve Bank of India (RBI) for allowing banks and associated brokers to start a commodity segment in their broking arm, which is not allowed as of now.

“SEBI is trying to convince another regulator to invest and trade in the commodities market. However, other regulators are still not comfortable to invest in commodities,” the source said.