MUMBAI: Sebi has overhauled the warehousing norms for the commodity futures market to ensure good delivery practices and that only robust players are part of the system. It may be recalled that the largest scam in recent times to dog the commodity market, the Rs. 5,600-crore NSEL scam, was founded on faulty warehousing practices.
For one, Sebi has followed the equity method of stipulating networth criteria for warehouse service providers (WSPs). Those WSPs having deposit of single commodity must have net worth of Rs. 10 crore. The net worth of those having deposit of more than one commodity is Rs. 25 crore.
NCDEX, the only exchange to have meaningful delivery of agri products, currently follows two methods for assessing net worth of WSPs. The asset valuation method, where net worth is computed based on 50% haircut of land, property, etc.
It also follows the equity method which will be in vogue now. Incidentally, NCDEX stipulates net worth of Rs. 10 cr for single commodity and Rs. 25 crore for one location single commodity and Rs. 50 crore for multiple location.
Now, the equity method will have to be followed by all exchanges accrediting WSPs. Time to meet the networth stipulation has been allowed till March 31, 2018 for existing WSPs not in con formity with these norms.
Another important part deals with WSPs owning 50% of the warehouses which Sumesh Parasrampuria, group CEO, Kunvarji, feels will enable only robust players to be approved by exchanges. “Right now, the leased rental and franchisee model, where multiple parties share the earnings, is followed. Now, this new stipulation of ownership will strengthen the structure.“
Exchanges have to ensure that at no time is the total value of goods stored in exchange accredited warehouses of the WSP exceeds 33 times its net worth.
The regulator has also come out with clubbing of position limits to ensure cartelisation and manipulation become more difficult. Erstwhile regulator Forward Markets Commission (FMC), which was merged with Sebi in September last year, had stipulated norms like common director, common phone number, etc to club positions taken by single entity having related parties operating. Sebi has spelt them out more clearly and deeply.
Credits ET Realty