SEBI allows hedge funds to invest in commodity derivatives

The Securities and exchange Board of India (SEBI) on Wednesday allowed hedge funds registered as category III different investment dollars (AIFs) to put money into commodity derivatives as shoppers, opening up the market to institutional buyers for the first time.

The Securities and alternate Board of India (SEBI) on Wednesday allowed hedge money registered as class III various funding dollars (AIFs) to put money into commodity derivatives as shoppers, opening up the market to institutional traders for the first time.

The action by way of SEBI marks a milestone in Asia`s 0.33-greatest economic system, which allowed futures trading in commodities given that 2003. but it is going to still maintain out foreign investors, banks, mutual cash and other establishments from investing in derivatives.

The move to speak in confidence category III AIFs, licenses which might be primarily granted to hedge dollars, may extend liquidity out there, accordingly offering firms more hedging alternatives and improving worth discovery.

category III AIFs could participate in all commodity spinoff products, but will not be able to invest more than 10 % of the investable cash in a single underlying commodity, SEBI mentioned in a statement.

These investors can even be allowed to use leverage, SEBI stated.

"The commodity derivatives markets in India lack the specified liquidity and depth for efficient price discovery and price possibility administration," SEBI said.

Market participants reminiscent of national Commodity and Derivatives alternate Ltd welcomed SEBI`s plan given volumes in Indian commodity futures have fallen to Rs 67 trillion (USD 1.04 trillion) in 2015/sixteen from Rs 170 trillion in 2012/13.

"The presence of AIFs, will spur the infusion of analysis based totally knowledge, capital, innovation and new trading strategies in India`s commodity markets," Mrugank Paranjape, managing director of Multi Commodity trade Of India Ltd.

Goldman Sachs Investments (Mauritius), Blackstone GPV Capital, Matthews Asia growth Fund and InterContinental trade (ICE) are amongst foreign investors that hang stakes in Indian commodity exchanges, which would make the most of increased buying and selling.

The transfer to open up commodity derivatives to hedge dollars will now lift hopes India will progressively open commodity markets to other members.

SEBI Chairman Ajay Tyagi took over in March, pledging to make creating commodity markets a key plank of his tenure.

"The market regulator has opened window for institutional investors. regularly we are able to are expecting participation of banks and mutual dollars," stated Harish Galipelli, head of commodities and currencies at Inditrade Derivatives & Commodities.

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