Regulation for commodities soon
KATHMANDU, SEP 14:
At a time when commodities exchanges have been coming under attack from investors for not being transparent and operating without any regulation, the capital market regulator has said that it will bring a regulation within a month.
The Securities Board of Nepal (Sebon) has already prepared the action plan for regulating commodities and derivatives market, said deputy director of Sebon Dr Nabaraj Adhikary, in an interaction programme on regulation of commodities and derivatives market in Nepal, here today.
“Even if an amendment to the Securities Act is not possible due to the absence of a parliament, the market will be regulated through an ordinance as soon as possible,” he added.
Commodities and derivatives exchanges have been operating since the last six years without any regulatory reign. Lately, the lack of regulation has raised an alarm regarding the security of investors’ interest.
Though Sebon had already started proceedings to frame a regulation for commodities market, the process got derailed as an amendment to the Securities Act hit a roadblock due to the dissolution of the parliament.
To prepare the regulation, Sebon had conducted a study which substantiated the fear that investors’ money was not safe in the commodities and derivatives exchanges, besides the increasing number of exchanges that have been trading online with various ‘doubtful’ software and ‘cheating’ investors.
They have neither contributed to the economy nor have been trading any local product like they claim. Instead they are involved in currency derivatives, which is illegal without the central bank’s prior approval.
However, Adhikary claimed that the regulation will be based on International Organisations of Securities Commissions, and Organisation of Economic Cooperation and Development.
“The board will fix a minimum capital for the exchanges and their members, and also fix fit and proper criteria for the exchanges as well as for promoters,” he claimed, adding that it will also ask the exchanges to purchase better software, maintain believable margins, have a settlement guarantee fund and counter party guarantee fund, and proper grievance handling system, among others.
There are six commodities exchanges operating in Nepal currently providing portals to buy or sell contracts of precious metals, crude oil, natural gas, base metals and agricultural products at an agreed price but there is no delivery system and transactions are held for speculative motive only.
Former chairmen of Sebon Dr Chiranjibi Nepal and Dr Surbir Paudyal have both stressed on the need to regulate commodities exchanges soon as the absence of a regulation has caused some market players to engage in wrongful doings that will eventually hurt the benefits of having a well developed commodities market.
The study pointed out the commodities market at a high risk as they have mobilised investments worth Rs 250 million, but have transactions worth Rs 13 billion.
President of the Forum for Commodity Market Bijay Satyal expressed that a generalisation that all commodities exchanges are swindling money from the investors is totally wrong, and such reports have hurt those exchanges doing the business legally.
Source: THT
