Paving way for Mutual Funds entry, SEBI allows custodial services in commodity market

New Delhi, January 4: Markets regulator Securities and Exchange Board of India (SEBI) has allowed custodial services in the commodity derivatives market.

 

The move is aimed at enabling the participation of institutional investors such as mutual funds and portfolio managers in the commodity derivatives market.

SEBI said in a notification that under the new framework, existing custodians will be permitted to add commodities as an asset class and provide physical delivery of both the securities and commodities.

Currently, the regulation on the custodian of securities provides safekeeping of securities, gold or gold related instruments, title deeds of real estate and incidental services.

However, it is not applicable for the protection of goods, which are underlying assets of commodity derivatives.

To enable participation of institutional investors in the commodity derivatives market, the regulator has made necessary amendments in the custodian regulations so as to provide for requisite custodial services.

The responsibility of custodians will not be limited to the holding of securities but would also include the holding of goods. The move is aimed at enabling the participation of institutional investors such as mutual funds and portfolio managers in the commodity derivatives market.