Regulator SEBI looks to ease liquidity crunch in commodity markets

The regulator is also working to reduce structural friction in commodity markets, including engaging with stakeholders on GST-related issues affecting participants who give or receive commodities through exchange platforms

Source

The Hindu — Business →

Quick Revision

Prelims-testable facts

01The Securities and Exchange Board of India (SEBI) is examining position limits for non-agricultural contracts to boost liquidity.
02SEBI is looking to streamline position limit and margin frameworks in commodity derivatives to reduce avoidable costs for market participants.
03The regulator will retain risk controls while easing position limit and margin norms in commodity markets.
04SEBI is engaging with stakeholders on GST-related issues affecting participants who give or receive commodities through exchange platforms.
05The regulator is considering easing position limits for non-agricultural commodity derivatives to deepen trading.
06SEBI has approved widening Foreign Portfolio Investor (FPI) access to selected non-agricultural commodity derivatives.

Trap alerts

Most people think SEBI is only looking to ease position limits, but actually the regulator is also working to reduce structural friction in commodity markets.
Most people think SEBI is only considering easing position limits for non-agricultural contracts, but actually the regulator is also examining position limits for agricultural contracts.

Prelims Practice MCQs

Single facteasy

SEBI is examining position limits for which type of contracts to boost liquidity?

A.non-agri contracts
B.agri contracts
C.commodity contracts
D.financial contracts

SEBI is examining position limits for non-agri contracts to boost liquidity in commodity markets.

Multiple statementsmedium

Consider the following statements regarding SEBI's Examination of Position Limits: 1. SEBI is examining position limits for non-agri contracts to boost liquidity. 2. SEBI is working to reduce structural friction in commodity markets by examining position limits for non-agri contracts. 3. The Ministry of Finance is examining position limits for non-agri contracts to boost liquidity. How many of the above statements are correct?

A.Only one
B.Only two
C.All three
D.None

Statement 1 is true because SEBI is examining position limits for non-agri contracts to boost liquidity (Fact 1). Statement 2 is true because SEBI is examining position limits for non-agri contracts (Fact 5) and this is likely to reduce structural friction in commodity markets (Fact 2). Statement 3 is false because SEBI is the regulator responsible for commodity markets (Fact 4), not the Ministry of Finance.

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