Commodity Exchanges To Have A Product Advisory Panel

In an effort to bring more transparency, markets regulator Securities and Exchange Board of India (Sebi) proposed that each recognised stock exchange dealing in commodity derivatives segment shall constitute a Product Advisory Committee (PAC). That said, the committee should be “for each group or complex commodities having common stakeholders or value chain participants, on, which derivatives are traded or being proposed to be traded on the exchange,” noted the regulator in a circular. 

Commodities are required to consult PAC for the contract design on new commodities and review of design of existing contracts, that caters to the industry’s needs. Further, PAC also needs to be consulted for the alignment of quality and quantity specifications of the product with the physical market, choice of basis and additional delivery centers and appropriate premium or discount for additional deliverable quality or delivery at additional delivery center, notes Sebi.  

However, exchanges hold the right to accept, reject or modify any recommendations made to it by the PAC. Further the PAC would also include a balanced representation from various categories of stakeholders. “Each PAC meeting shall be headed by a Chairperson (who shall be an independent person with experience in the specific commodity) selected as such for the meeting based on attendees’ choice. PAC shall have an exchange executive as Vice Chairman for administrative coordination or decision,” mentioned the circular.   

The PAC are also required to meet at least twice a year and more frequently as and when required. Further at least 50 per cent members (excluding representative from exchange or clearing corporation) shall be present, including its chairperson or vice chairperson (acting chairperson), are required to be present during the PAC meeting. Also, there would be an annual review of the PAC’s performance undertaken by the Regulatory Oversight Committee of the stock exchange.