Commodities market regulation delayed
KATHMANDU, DEC 24:
The introduction of a commodities market regulation is getting delayed as authorities are in a dilemma on whether to regulate the exchanges through a regulation or wait for an amendment to the Securities Act 2063.
“The Law Ministry has recommended to bring the commodities market under a regulatory ambit through the enactment of Securities Act so that a strong legal base can be formed,” said chairman of Securities Board of Nepal (Sebon) Baburam Shrestha. Sebon has been commissioned by the government to regulate the commodities market.
Sebon was asked to regulate the commodities market in the budget of fiscal year 2010-11. Its plan got derailed in May this year following the dissolution of the parliament. Sebon had to get the Securities Act 2063 amended to include commodities and derivatives market under its regulatory jurisdiction, which was not possible in the absence of a parliament that needs to approve the amendment of the Act.
“However, we are planning to introduce the regulation in the Finance Act that comes along with the budget so that the regulation will have an equally strong legal base,” added Shrestha. After getting the approval from the Law Ministry, the regulations will be forwarded to the cabinet from the Ministry of Finance for the final approval.
Once again, the fate of the regulations coming into existence has been tied to the budget announcement. The current government’s attempts at bringing a full-fledged budget is being shot down because of its caretaker status, and the regulation also cannot be expected to come anytime soon.
Capital market regulator’s hurry to bring commodities and derivatives market under a regulatory ambit at the soonest has created suspicion that regulations will be half baked and will not be strong enough to straighten existing market participants.
The blossoming commodities market has come under fire after Sebon released its study report on the undertakings of the exchanges in August. Even though the report did not find any illegal undertakings by these exchanges and brokers, it substantiated doubts that market operation is not in favour of investors.
Moreover, suspicious trading software, lack of transparency and bad corporate governance have left investors vulnerable. The study pointed out that commodities market that has mobilised investments worth Rs 250 million, has an investment of Rs 13 billion from investors. And 80 per cent of investors lose their investment.
There are seven commodities exchanges operating in Nepal at present, that only provide a portal to buy or sell contracts of the commodities such as precious and base metals, crude oil and few agricultural products, but there is no delivery system and transactions are held for speculative motive only.
“We also want Sebon to bring in regulations as soon as possible because all the negativity towards the market has diverted investors,” said a managing director of a commodities exchange.
Source: THT
