Regulation for commodities market by this year

KATHMANDU, APR 16:

The committee formed to study the commodities market has suggested the capital market regulator to promptly bring the commodities market under regulatory reins.

“The initial report has suggested regulating the commodities market with a directive instead of waiting for the amendment of the Securities Act-2063,” said an official of Securities Board of Nepal (Sebon).

“It is not prudent to try regulating the commodities market that supposedly handles a large sum of money through mere directives,” pointed out the official citing the example of mutual funds. “Even for operation of mutual funds which is a part of the capital market, regulation was necessary, so Sebon will introduce a guideline.”

Sebon that has been designated by the government to draft a regulation for the commodities market has to get the Securities Act-2063 amended by the cabinet to include the market within Sebon’s jurisdiction. The information collected from the study is aimed at providing a clearer picture regarding how the exchanges have been operating and what they are trading on, the modes of payment being used and the size of their businesses among others.

“It is just a first draft of

the report so it contains methodologies employed by the exchanges for trading and the issues of the market but does not have statistical figures so we have to wait for the upcoming draft for facts and figures,” pointed out the official. The deadline for submitting the final report has been set for mid-May.

The study will also suggest necessary measures to supervise and regulate any grey areas in their mechanisms. The regulator aims to complete the drafting of the regulations to supervise the commodities market before the end of the current fiscal year. There are more than 50 companies registered as ‘brokerage and exchange’ firms with the Company Registrar’s Office and any of those firms can set up an exchange business because of the absence of regulations.

“Once the regulation is introduced, then only those exchanges which fulfill the criteria fixed by the law will be allowed to operate,” according to the official.

At present, there are six commodities exchanges operating but they are not under any regulatory rein.

In the absence of regulations to govern them, these exchanges have no obligation to disclose their transactions and money being handled increasing the vulnerability of the investors engaged in commodities transaction being duped. There is no account of the money being handled by these exchanges except for the amount shown as income and expenditure in their balance sheet for tax purposes.

Source: THT