Across the world we have seen the unification of trading in all kinds of products — spot or derivatives, equities or currencies or fixed income or 813530commodities etc., OTC or exchange. It makes too much sense to reap economies of scale and economies of scope, both in the private sector and in the work of regulation and supervision. The arrangement in India, where the Forward Contracts Regulation Act (1952) envisages the Forward Markets Commission that is a part of the Department of Consumer Affairs, is a silly one.

Everything we have learned about how to run the equity market is valuable for commodity futures:

  • The regulatory governance process at SEBI including authority to issue regulations, enforcement process, appeals at SAT, etc.
  • Governance problems of Infrastructure Institutions with three-way separation between shareholders, managers and trading members.
  • Netting by novation at the clearing corporation.
  • Not having `badla’ trading.   Continue reading
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