SEBI Current Affairs - 2019
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Commodity derivatives bourse Multi Commodity Exchange Ltd (MCX) has received markets regulator Securities and Exchange Board of India’s (SEBI) approval to launch India’s first gold options contract.
The gold futures contract will have bi-monthly duration. The option will also have the existing gold kilo futures contract as its underlier.
The launch of gold options is one of the major reforms SEBI has taken for the commodity derivatives market. Earlier in June 2017, SEBI had allowed options trading in commodities to deepen the market but permitted each exchange to launch options on futures of only one commodity initially.
SEBI is going to put strict eligibility criteria and options could be launched on futures contract of only those commodities that are among the top five in terms of total trading turnover value of previous 12 months. It also has stipulated necessary guidelines with regard to the product design and risk management framework to be adopted for trading in options on commodity futures.
About Multi Commodity Exchange Ltd (MCX)
The MCX is the country’s largest metals and energy commodity bourse. It is country’s first listed commodity futures exchange that facilitates online trading, and clearing and settlement of commodity futures transactions, thereby providing a platform for risk management.
It began functioning in November 2003 and operates within the regulatory framework of the Forward Contracts Regulation Act, 1952 (FCRA, 1952). It offers futures trading in bullion, ferrous and non-ferrous metals, energy, and a number of agricultural commodities (mentha oil, cardamom, potatoes, palm oil and others). Globally, MCX ranks no. 1 in silver, no. 2 in natural gas, no. 3 in crude oil and gold in futures trading.
Market regulator Securities and Exchange Board of India (SEBI) has set up a committee on ‘fair market conduct’. It will be headed former law secretary T K Viswanathan.
The committee will suggest measures for improving surveillance of the markets and strengthen rules for algorithm trades, among other norms.
Its members include representatives from law firms, mutual funds, retail and institutional brokers, forensic auditing firms, foreign portfolio investors, stock exchanges, chambers of commerce, data analytics companies and the markets regulator.
The securities market environment is dynamic, so there is need for periodic review of regulations and surveillance mechanisms in order to effectively discharge the objectives of SEBI.
Terms and Reference of Committee
The committee will suggest measures for improvement in PFTUP (Prohibition of Fraudulent and Unfair Trade Practices) regulations, PIT (Prohibition of Insider Trading) norms and norms mainly related to ‘trading plans’ and handling of ‘unpublished price sensitive information’ during takeovers.
It will suggest short term and medium term measures for improved surveillance of the markets as well as issues of high frequency trades, harnessing of technology and analytics in surveillance. It will suggest evidentiary issues in anti-fraud enforcement. It will be also responsible for recommending steps to align insider trading regulations with Companies Act provisions.
About Securities and Exchange Board of India (SEBI)
SEBI is the statutory regulator for the securities market in India established in 1988. It was given statutory powers through the SEBI Act, 1992. Its mandate is to protect the interests of investors in securities, promote the development of securities market and to regulate the securities market.
SEBI is responsive to needs of three groups, which constitute the market, issuers of securities, investors and market intermediaries. It has three functions quasi-legislative (drafts regulations in its legislative capacity), quasi-judicial (passes rulings and orders in its judicial capacity) and quasi-executive (conducts investigation and enforcement action in its executive function).