KRAs approach Sebi, FMC to enter commodities segment

After tasting rapid success in the securities segment by getting lakhs of customers on board, KYC registration agencies (KRAs) are now eyeing commodities market. KRAs have asked both the securities and commodities regulators for permission to operate in the commodities space.

According to sources, KRAs have already submitted a formal application to Securities and Exchange Board of India (Sebi) and Forward Markets Commission (FMC), and are expecting a response by next month.

?Both the regulators are involved as KRAs are regulated by Sebi and FMC looks at the commodities market,? said a source. ?The whole process started when one of the spot exchanges approached us, asking if our database could be used for commodity market investors, who still face issues related to multiple and repetitive KYC. Then, we approached both the regulators who, we believe, are evaluating the matter,? the source explained.

While the know your customer (KYC) procedures in the securities market have been completely revamped with the introduction of KRAs, the scene is still totally different in the commodities market. Investors who want to deal in commodities have to get the entire KYC done all over again when they move to a new broker (which was the case earlier in the securities market before KRAs were introduced).

Sebi approved the concept of KRAs in December last year, following which CDSL Ventures (CVL), NSDL Database Management (NDML) and DotEx International got registered as KRAs.

According to estimates, CVL has around 6.5 lakh client accounts followed by NDML (2 lakh) and DotEx (2,000).

The fact that KRAs are gaining popularity is further corroborated with the fact that there are more entities that are interested in getting registered as KRAs. While Sebi clarified that the KRA system will be applicable for all new client accounts opened from January 1, 2012, last week it came out with guidelines for moving all the old client records on the KRA system.

According to the Sebi norms, KRAs have to complete the KYC process and make the details available to all market intermediaries that register with it.

With KRAs in place, the regulator aims to simplify and centralise the whole KYC process for the client that is often touted to be cumbersome.

Incidentally, Sebi chairman UK Sinha had said in January that the capital market regulator is in talks with other regulators to see if the KRA mechanism can be extended to segments that do not fall under Sebi’s jurisdiction.

?It’s too premature to talk about that when it can be done. We are in dialogue with them (regulators). If this system proves itself to be very robust, then maybe other regulators can have a look at it,? he had said.