Market regulator SEBI on 26th April, 2017 decided to grant a unified licence to brokers and clearing members to operate in commodity derivative as well as equity markets.
SEBI’s board approved a proposal for integration of stock brokers in equity and commodity derivative space.
Following this, a broker or clearing member 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.
To enable the integration, SEBI will amend norms pertaining to stock broker and securities contract regulations.
The integration of stock brokers in equity and commodity derivative markets while having many synergies in terms of trading and settlement mechanism, risk management, redressal of investor grievances, etc would benefit investors, brokers, stock exchanges and SEBI.
Besides, it will increase economic efficiency in terms of meeting operational and compliance obligations at the member level, potentially resulting in ease of doing business.
Also, the integration will help in widening market penetration and facilitate effective regulatory oversight by stock exchanges and SEBI.
Bolstering steps to curb any flow of illicit funds in markets, SEBI also decided to bar resident as well as non-resident Indians from making investments through participatory notes.
The decision is part of efforts to strengthen the regulatory framework for offshore derivative instruments (ODIs), commonly known as participatory notes (P-Notes).
These have been long seen as being possibly misused for routing of black money from abroad.
The notional value of these instruments has declined over the years from 55.7% of overall FPI investments in June 2007 to just 6.7% in December 2016.
P-Note investments may now start coming from other jurisdictions like the US, France and the Netherlands after tightening of rules for inflows from Mauritius, Singapore and Cyprus.
