New commodity trade norms

Commodity markets in the country, which are witnessing a fast growth in terms of volume, will finally come under stringent regulatory guidel...

Commodity markets in the country, which are witnessing a fast growth in terms of volume, will finally come under stringent regulatory guidelines.

Forward Markets Commission (FMC), the commodity market regulator, has come out with norms for commodity market intermediaries, setting specific requirements on eligibility, registration, inspection, penalty and fee.

“We are planning to introduce compulsory registration of commodity exchange intermediaries with FMC and draft guidelines for this have been prepared,” FMC Chairman S. Sundareshan said.

The draft guidelines have been posted on FMC’s website for public comments, Sundareshan said after launching ‘Agri Composite Index’ by the National Commodity & Derivatives Exchange Ltd (NCDEX)’.

“Making registration compulsory is not a revenue generation mechanism for FMC but it is purely a regulatory mechanism. Unless we do not have effective control over the activities of market intermediaries, FMC cannot check malpractices,” he said.

FMC has the power to inspect books and accounts of traders if they find any irregularities in their activity. “In case we find any malpractices from intermediaries, FMC will deal directly to ensure that best practices are followed by them while trading,” he said.

Sundareshan said the regulator would also closely monitor price movements of commodities on a weekly basis to check price volatility. “FMC is analysing various issues like extending level playing field for commodity exchanges, delivery mechanism, settlement of closing price and standardisation of contract to streamline operations of commodity exchanges,” he added.

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As per the guidelines, no member or non-member should enter into any forward contracts (transferable specific delivery and other than specific delivery contracts in commodities) unless he holds a certificate of registration granted by the FMC.