Stock exchanges may be off limits for
gold exchange traded funds (ETFs), which are commodity-based assets but are currently traded at the bourses like stocks, if the Forward Markets Commission (FMC) has its way on governing them.
FMC, the commodity futures market regulator, has been at loggerheads with the
Securities and Exchange Board of India (Sebi) over the jurisdiction on governing gold ETFs and also all other future ETFs relating to commodities. FMC believes that it should be given the right to monitor gold ETFs as the underlined asset is a commodity. Therefore, Sebi should stop governing them and must not allow any further listing of ETFs till the jurisdiction is finalised, it feels.
Sebi, which has been governing gold ETFs since 2007, has stopped listing of any more gold ETFs in the stock exchanges and mutual funds have been debarred from launching gold ETF schemes till the matter is sorted out. "We (FMC and Sebi) are in constant touch with each other regarding this matter. Because gold ETFs deal with gold, which is a commodity, it should come under our domain," said B.C. Khatua, chairman, FMC.
"The capital market should not launch any commodity related assets. Gold has been the only exception. In the larger interest of investors, we have capped the launch of gold ETFs," he said. This is the reason for the delay in introduction of silver and copper ETFs. If the government finally allows FMC to govern gold ETFs, then they would be traded at the commodity exchanges like any other commodity futures.
FMC believes that though ETFs are traded like mutual fund units, they still affect the demand and supply of gold and thus the pricing. Meanwhile, FMC has also stepped up efforts to enable farmers get full benefits of commodity exchanges in the country and get better prices of their agri-products.
FMC, which was working on a price dissemination project to help farmers get on-time pricing through of price ticket boards at the Agricultural Produce Market Committees (APMCs), said the project has taken off well and some more modifications will be introduced in the interest of farmers.
Currently, around 822 APMCs have been covered in 22 states under this project and ticker boards displaying spot and futures agricultural prices of commodities have been installed. To address the failure of price ticker boards due to the malfunctioning or power outage, FMC has proposed the introduction of GPRS-enabled price ticker boards so that farmers in far flung areas in rural India can decide when to sell their produce and even decide what crop to produce next year for better pricing.
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