A proposed act on commodity exchange has envisioned forming a separate exchange market operator for the sector similar to the Nepal Stock Exchange (Nepse). Apart from empowering the Securities Board of Nepal (Sebon) as the main regulatory body, it has mentioned setting the standard of the commodities traded and maintaining the necessary infrastructure including warehouses.
The act is being prepared by Sebon, the regulatory body of the stock market, and is in the final stages of completion. The act is expected to regulate the commodity exchange in an effective way. The act will empower Sebon to develop a new exchange market operator like Nepse. Mukti N Shrestha, deputy director at Sebon and a member of the drafting committee, said the commodity exchange act was being prepared in the modality of the derivative market in foreign countries.
According to him, the proposed act has envisioned allowing speculation based on weather conditions and the energy sector. Speculative trading in commodities like precious and industrial metals, petroleum products and agricultural goods, among others, has been the major activity at the commodity exchange. "However, the planned act will not allow speculation in daily essentials and goods that are of national importance," said Shrestha.
Till date, the commodity exchange has been operating without any proper legal framework. The existing Securities Act has been inadequate to regulate the commodity exchange as a part of the securities market. After irregularities were seen in the sector last year, the government asked Sebon to prepare a draft act. Earlier, a study carried out by Sebon had also revealed many malpractices in the sector with more than 80 percent of the investors losing their money while investing in the commodities market.
The study found that the commodity market had been conducting transactions in foreign exchange without the central bank's approval as required by the Foreign Exchange Regulation Act. There was also no uniformity in the commodities being traded, the nature of the contracts, margin, commission and fees among the different exchanges. Shrestha said the proposed act would allow Sebon to structure the operator and fix the brokering agencies. "The agencies will have to submit their financial report to Sebon on a periodic basis," he added.
According to him, Sebon will upload the preliminary draft of the act on its website by the end of this month. "After collecting feedback on the draft and making the necessary improvements, we will send it to the concerned authorities for their final approval." Currently, the commodity market in the country is being operated only as a spot market. As a result, the market cannot predict the demand and supply situation of the particular commodity in the domestic market.
Sebon's spokesperson Niraj Giri said the commodity market could help find out the actual demand and supply situation of the commodities in the market. "This can help maintain price stability by minimizing risks to entrepreneurs that could arise due to price fluctuations," he said.
source: the kathmandu post,10 feb 2014
LINK
The act is being prepared by Sebon, the regulatory body of the stock market, and is in the final stages of completion. The act is expected to regulate the commodity exchange in an effective way. The act will empower Sebon to develop a new exchange market operator like Nepse. Mukti N Shrestha, deputy director at Sebon and a member of the drafting committee, said the commodity exchange act was being prepared in the modality of the derivative market in foreign countries.
According to him, the proposed act has envisioned allowing speculation based on weather conditions and the energy sector. Speculative trading in commodities like precious and industrial metals, petroleum products and agricultural goods, among others, has been the major activity at the commodity exchange. "However, the planned act will not allow speculation in daily essentials and goods that are of national importance," said Shrestha.
Till date, the commodity exchange has been operating without any proper legal framework. The existing Securities Act has been inadequate to regulate the commodity exchange as a part of the securities market. After irregularities were seen in the sector last year, the government asked Sebon to prepare a draft act. Earlier, a study carried out by Sebon had also revealed many malpractices in the sector with more than 80 percent of the investors losing their money while investing in the commodities market.
The study found that the commodity market had been conducting transactions in foreign exchange without the central bank's approval as required by the Foreign Exchange Regulation Act. There was also no uniformity in the commodities being traded, the nature of the contracts, margin, commission and fees among the different exchanges. Shrestha said the proposed act would allow Sebon to structure the operator and fix the brokering agencies. "The agencies will have to submit their financial report to Sebon on a periodic basis," he added.
According to him, Sebon will upload the preliminary draft of the act on its website by the end of this month. "After collecting feedback on the draft and making the necessary improvements, we will send it to the concerned authorities for their final approval." Currently, the commodity market in the country is being operated only as a spot market. As a result, the market cannot predict the demand and supply situation of the particular commodity in the domestic market.
Sebon's spokesperson Niraj Giri said the commodity market could help find out the actual demand and supply situation of the commodities in the market. "This can help maintain price stability by minimizing risks to entrepreneurs that could arise due to price fluctuations," he said.
source: the kathmandu post,10 feb 2014
LINK
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