At present, stock exchanges with commodity derivatives segments are required to maintain two distinct funds
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HEMANSHI KAMANI
The Securities and Exchange Board of India (SEBI) is planning to merge the investor protection funds (IPFs) maintained separately for equity and commodity segments into a single trust, as part of efforts to streamline compliance and strengthen investor safeguards, people aware of the development said.
At present, stock exchanges with commodity derivatives segments are required to maintain two distinct funds — one for equity and related products such as bonds and derivatives, and another, the Commodity Investor Protection Fund (CIPF), for commodities. Both these funds are meant for compensating investors in case of defaults by member brokers.
Exchanges such as BSE, even maintain separate trusts for managing the two funds. Investments are also required to be maintained separately as the two IPFs are separate. “This is a logical step since equity and commodity segments already operate under one regulatory roof. It will remove redundancies in governance, administration, and compliance — improving operational and cost efficiency,” said an exchange source.
Unified fund
Merging the funds will also reduce compliance costs and administrative effort, while enabling a single governance framework for improved monitoring, audit controls and risk management. Importantly, it will ensure consistency in compensation policies, another exchange source said.
Taking into account all these concerns and reasons, the market regulator is expected to issue a consultation paper proposing the merger. The new unified trust, tentatively called the Exchange Investor Protection Fund Trust, is expected to cover investor protection across all segments of the market.
If the two funds are merged, any claims arising from clients of members who have defaulted in the commodity segment, would be compensated from the single IPF with the exchanges. “Commodity investors could be the bigger beneficiaries as compensation limits in commodities have so far been lower than in equities. Under a merged trust, payouts are likely to be aligned,” said an industry source.
Since the merger of the Forward Markets Commission into SEBI in 2015, equity and commodity markets have come under a single regulator. Most brokers today are members across both segments, while exchanges themselves are structured as unified entities housing multiple products.
An email sent to SEBI for comments did not elicit a response.
Published on September 8, 2025