Futures market players have come into the existence since last few years. They are trading on commodities like gold, silver, copper, cotton, coffee, wheat, soya bean, natural gas, heating oil and crude oil, among others. Still, the government has not laid down rules and regulations to regulate them so far.
The government in the budget for current fiscal had made a commitment to create a legal domain and regulate them. But officials said Ministry of Finance (MoF) is still to take steps toward fulfilling this commitment.
The lack of legislation has affected growth and expansion of the futures market. Also, in the absence of legal recognition, exchange operators said they are not being able to bring popular future market instruments into operations.
For instance, Mercantile Exchange Nepal (MEX) disclosed that it is planning to soon introduce trading of locally produced essentials, develop standardized and insured warehouses for delivery and introduce Market and Agri Index.
“But we are facing challenges due to the lack of regulations, unavailability of grading and quality assurance system, different acts for commodities and lack of global practice to manage warehouse, among others,” said Jitesh Surendran, chief executive officer of MEX.
While urging for the immediate formulation of the legislative framework to govern commodities market, he also urged the government to recognize and introduce legislation for warehouse receipts, to lay down an efficient tax system for the profits of clients as practiced in other countries and recognize futures commodity market as an industry.
Ananda Bagaria, an entrepreneur dealing on agricultural products, mainly stated that the lack of appropriate laws has hit formal growth and prevented building of credibility and confidence of the future market.
“Futures commodities market can help country do away with present supply bottlenecks and also provide market access to farmers, preventing them from the need to dispose produces at unnecessary low prices. But the government must realize these benefits and take actions to recognize the business immediately,” he said.
As for the regulation of the sector, experts expressed diverse opinions. Some believed the sector should have an independent autonomous regulatory authority, while Krishna Bahadur Manandhar, deputy governor of Nepal Rastra Bank noted that the regulatory responsibility should be given to the Securities Board Nepal (SEBON).
“It might be inappropriate to constitute a separate regulator when the sector is still evolving. Till it matures, SEBON can oversee the sector,” he said, adding that the government should give enough teeth to the SEBON though for the regulatory function.
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