Soon, your mutual funds, PMS may get to invest in commodity derivatives

Mumbai: After permitting commodity exchanges to launch options trading and allowing category III alternate investment funds to participate in trading, the market regulator could soon allow entry of mutual funds and portfolio management services into the 14-year old commodity derivatives market (CDM), two persons aware of the development confirmed to ET. The approval could come in the next two-three months.

“It's the next logical step in terms of deepening participation,“ said one of them. “Since both mutual funds and PMS are regulated by Sebi, the decision to allow their participation would be taken in the next two-three months.“

The Securities and Exchange Board of India (Sebi) officials were not immediately available for comment. In June this year, Sebi allowed commodity exchanges such as MCX and NCDEX to launch options on commodity futures and permitted Cat III AIFs -hedge funds and private equity funds that invest in listed companies -to participate in the CDM. Much of the participation is currently confined to retail and wholesale traders, speculators and a few corporate hedgers, including jewellers, bullion dealers, grain dealers, etc.

Sebi took over regulation of the CDM in September 2015, after the government decided to merge the erstwhile regulator Forward Markets Commission (FMC) with it.

Metals and energy bourse MCX, agri futures bourse NCDEX and plantations exchange NMCE, now merged with ICEX, accounted for . 64.99 lakh crore turnover in FY17.` MCX accounted for 90.2% of the turnover, NCDEX for 9.2% and NMCE for 0.4%. Against this, turnover of equity derivatives on NSE was a massive ` . 944 lakh crore in FY17, Sebi data shows. The equity derivatives market has not only more products traded like indices but also institutional participation lacking thus far in the CDM.