Commodities, stocks to be on same exchange

Markets regulator Sebi has allowed trading on stocks and commodity derivatives on the same exchange from next October. Simply put, investors can now trade gold, crude oil and wheat along with Reliance and Infosys shares on BSE, NSE, MCX and NCDEX. They can use a single demat account and also a single bank account for both kind of trades.

The regulator’s decision meets a long-standing demand by market players to align Indian markets with global practices.

Brokers are already allowed to offer trading of both stocks and commodity derivatives to their clients under the same roof. Earlier, clearing houses too were allowed to offer services for both types of assets. Currently, investors can trade gold and crude oil on MCX, wheat on NCDEX, and company stocks on BSE and NSE.

The Sebi decision could also lead to cost savings for investors, as under the new system, money set aside for stock trading but which is unused, could be deployed in commodities like gold, silver, crude and wheat within minutes. The decision could also push for a merger of stock exchanges and commodity derivatives bourses, mainly to leverage the economies of scale.

Sebi chairman Ajay Tyagi said that the integration process of the bourses would involve removal of certain existing legal restrictions by amending the relevant laws which would allow all exchanges in the country, currently offering trading platforms either for stocks or commodity derivatives, to provide a universal trading platform. In the run-up to this decision, Sebi had allowed one single broker to offer stock and commodity derivatives trading and also clearing houses to offer services for both types of products.

The government was also keen that both the markets are integrated after it merged Forward Markets Commission, the commodity derivatives market regulator, with Sebi in late 2015. In the Budget speech for 2017-18, finance minister Arun Jaitley had pushed for universal exchanges in the country.

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