Deutsche Bank may get Sebi nod to operate as commodity custodian for MFs

Sebi's board in March this year approved a proposal to allow mutual funds and portfolio managers to trade in this segment.

New Delhi: Markets regulator Sebi is likely to give approval to Deutsche Bank by next month to operate as a custodian in the commodities space, a move which will enable participation from institutional investors, including mutual funds and portfolio management service providers, in such segment.

To help broaden the commodity derivatives market, Sebi's board in March this year approved a proposal to allow mutual funds and portfolio managers to trade in this segment.

Moreover, the regulator made necessary amendments in the custodian regulations so as to provide for requisite custodial services.


The regulator in May came out with guidelines allowing mutual funds and portfolio managers to invest in commodity derivatives.

However, institutional investors have been staying away from the segment and experts believe lack of custodial services has been a key deterrent to institutional participation in the commodity derivatives markets.

Many custodians have been sceptical about managing the physical delivery of commodities as they lack domain expertise with regard to agricultural commodities and warehousing.
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Now, sources privy to the development expect some participation from institutional investors in the commodities derivatives market from this year which will deepen the market.

"Deutsche Bank is expected to get a green signal from Sebi by October to provide custodial services and once the custodian thing will happen, we will see some participation from institutional investors in the commodities derivatives market this year," a source close to the development said.

Besides, HDFC Bank and Stock Holding Corporation of India among others have approached the capital markets regulator to provide custodial services, he added.

Under the Sebi guidelines, mutual funds need to appoint a registered custodian for underlying goods, in view of the physical settlement of contracts.
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