Commodities exchanges ignore Sebon directive
KATHMANDU, APR 25:
Regulating the commodities market will be a Herculean task for the capital market regulator. Due to lack of cooperation from commodities exchanges, the study committee assigned to conduct a research on the commodities market to aid the drafting of regulations for the sector was unable to come up with a strong report.
“The commodities exchanges have even refused to answer questions regarding their daily turnover and activities, to the committee formed to study the commodities market despite being mandated by the High Level Financial Coordination Committee,” informed an official at Securities Board of Nepal (Sebon) which has been commissioned to undertake the role of a regulator of commodities market.
“The assumptions that commodities exchanges are doing something fishy seem to be true as their evasive behaviour is suggesting that they have something to hide,” pointed out
the official. The High Level Financial Coordination Committee had asked the capital market regulator to conduct a detailed study in order to draft the regulation.
The study committee that has already submitted the first draft is supposed to submit the final report by mid-May. Based on the findings of the study, Sebon and the concerned regulators will design the regulation.
However, properly regulating the commodities market along with the capital market seems to be next to impossible for Sebon with its limited organisational capacity. “With less than 20 officers, expecting Sebon to effectively regulate commodities exchanges and their brokerage houses is very difficult,” pointed out former chairman of Sebon Surbir Paudyal, stressing on the need to improve the organisational strength of the capital market regulator.
“The commodities market is complicated and interconnected with the international market and has ample space for manipulation. To detect any misconduct in trading, the human resource at Sebon has to be equally competent,” added Paudyal. His views were seconded by another former chairman of Sebon Dr Chiranjivi Nepal. “As it is, regulating the stock exchange, brokers and listed companies is difficult for Sebon, and now being asked to regulate the technically intricate trading of commodities will not be easy,” he said.
Dr Nepal suggested on establishing a separate entity or a separate body within Sebon with well trained human resources that have proper knowledge regarding the market if it undertakes the responsibility to regulate the commodities exchanges.
At present, there are six commodities exchanges operating, with another in the pipeline. These exchanges are operating without any regulatory rein but are supposedly handling billions of rupees. There is no disclosure of their financials and how the commodities are being traded which has put the money of general investors in a vulnerable position.
Source: THT
