ZeeBiz Exclusive: SEBI may allow FPIs to enter the commodity market at the June 29 board meeting

The Securities and Exchange Commission of India (SEBI) is likely to allow foreign portfolio investors (FPIs) to enter the commodity market, Zee Business special correspondent Tarun Sharma said in a report Tuesday. The SEBI board will meet on June 29 to make a number of decisions / approvals.

Calling this the biggest decision to be made by SEBI, Sharma said FPI could first be authorized in segments of non-agricultural commodities such as gold and metal, among others. He added that the decision to allow FPI in the Agri segment will be made later.

The Agri segment is directly related to food prices and there are fears of rising prices if FPI is allowed in it, Sharma noted. However, they will also be allowed in the Agri category, he said.

FPI’s entry into the commodity market is long overdue, as SEBI issued a discussion paper earlier in December 2021 and it was also approved by the CDAC (Commodity Derivatives Advisory Committee), the special correspondent said.

He added that the market regulator had also sought a recommendation from the Reserve Bank of India, publishing a discussion paper on the same, to which the central bank also gave its approval.

In addition, this solution will also help Indian corporations, mainly FMCGs and oil companies, to enter the commodity market, as they will also come to hedge, amid huge hedges.

Another decision that SEBI is likely to take is to ease the minimum share selling rate to 2.5 per cent of 5 per cent for companies with a market capitalization above Rs 1 lakh crore, and the same was done for the life insurance corporation during its public supply in the previous month.

In addition, the Board of the Capital Markets Regulator approves the proposed regulatory framework for algorithmic trading (algo trading) by retail investors in order to make such trading safe and prevent market manipulation.

The algo trading system automatically monitors the prices of live shares and initiates an order when the given criteria are met. This frees the trader from the need to monitor live stock prices and initiate manual placements.

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