Securities & commodity markets to converge, have single regulator

Mumbai, Oct 29 | Updated: Oct 30 2004, 06:03am hrs
The finance ministry is working towards having a single regulator, and a common set of regulations for the securities and commodity markets, with a view to integrating them further.

The government is also keen to develop India as a global outsourcing hub for financial services and a trading hub for the global bullion and currency markets. A separate regulator is also being proposed for the pension sector.

At the tenth year celebrations of the National Stock Exchange (NSE) during a day-long whistlestop visit here, finance minister Palaniappan Chidambaram said, The biggest companies are sending parts of their operations to India in a big way, like software, accounting, back-office and research. Why cant we build the entire chain. India can produce the lowest-cost infrastructure for the financial services sector, which can handle the outsourcing of securities operations from other countries.

Finance minister P Chidambaram flanked by Sebi chairman GN Bajpai (L) and UTI CMD M Damodaran at a function at National Stock Exchange in Mumbai on FridayElaborating further, he said, for instance, the Venezuelan stock exchange could be a front-end and the back-office transactions work could be outsourced to India. Trading of overseas securities could take place in India, and the bullion and forex markets could serve as global hubs, he said.

Dwelling on the theme of a convergence of the commodities and securities markets, Mr Chidambaram pointed out that this would eliminate migration of risks and ensure best price for farmers even in remote areas.

We are working towards a common regulator and are taking legal steps for common regulation of these two markets. The trading and dematerialisation of warehouse receipts is also being worked on, the finance minister said, adding that his ministry and the department of consumer affairs are discussing the modalities.

On the pensions sector, he said it was important to ensure that lifetime savings of people were invested in the most transparent manner.

Addressing the financial community, he said: I want to leave some questions with you. What should be the strategy that India should adopt to become a world player in financial services How can we replicate the successes we have achieved in trade, industry and software in financial services

Emphasising the need for the financial sector to go global, he said: If Tata and Bajaj can sell their products overseas, why not financial services players We have a modern and professional set-up in mutual funds, brokerages and insurance, where foreign players have been allowed. This should be extended. The financial services sector must go global and do financial intermediation abroad.

Urging market participants to follow the highest standards of fairness and transparency, the finance minister said: The household savers have kept the economy going. The market is a medium where these savings are translated into investments. Market players must remember this while conducting every trade, deal and settlement. In the interest of the market, these savers must regard the market as safe and transparent. Every time you damage the market, you damage yourself and the economy. Every time there is a scam, thousands of investors run away from the market and it takes years to rebuild that confidence.