Balance for buyers

Of course, the fines varied from 0.5 to 3 per cent across exchanges and commodities — MCX effects a penalty of 1 per cent and NCDEX 0.5 per cent — but it hardly mattered, as sellers were hitting pay dirt. ‘‘The profits are huge enough to offset not only the fine but also brokerage fees,’’ said a market player.

But through a heftier penalty, FMC aims to make delivery compulsory for all standing contracts on their maturity and ensure that members wishing to take delivery are not stripped of their right. Also, the intention for delivery will have to be made clear at least five days before the contract expires. This will apply to all contracts beginning November and commodities traded across all exchanges.

The regulator wants all transactions squared off before the contract ends or is rolled over. Obviously, this has not been the case so far.

FMC, say sources, has swung into action after many cases of misutilisation of seller’s option was brought to its notice. It has also decided to inspect the books of brokers, although opting to restrict itself to the cases of leading members — again another countermeasure.

But will the new fine — sources say FMC discussed 10 per cent, but settled for 5 per cent — prove effective? Sushil Sinha, Manager for Commodities at Geojit Securities, thinks so. ‘‘FMC’s move is an important one as buyers have the same rights as sellers. Earlier, many genuine players were keeping off the market for lack of compensation. Now the number of default cases will come down,’’ he said.

Not everyone agrees though. Multi Commodity Exchange of India (MCX) CEO Anjani Sinha said although he hasn’t read the FMC circular, imposing a fine is alright when a seller states his intention and fails to deliver. But for those who haven’t stated their intention, a gentle fine is apt. Anything else is against commodities market fundamentals, he said.