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Each sector can’t have its own regulator for forward trading: FMC

The Forward Market Commission has expressed its displeasure over the “non-cooperative and adamant” stand of the Central Electricity Regulatory Commission on the issue of regulating power trading on exchanges.

Written by MADHUSUDAN SAHOO | Mumbai |
June 22, 2011 2:07:34 am

The Forward Market Commission (FMC) has expressed its displeasure over the “non-cooperative and adamant” stand of the Central Electricity Regulatory Commission (CERC) on the issue of regulating power trading on exchanges.

The FMC,the regulatory authority for commodity markets,which functions under the Ministry of Consumer Affairs,Food and Public Distribution,also indicated that it is expected to resolve the issue of regulating gold exchange traded funds soon.

“It does not make sense for every individual sector and commodity to have its own regulator for forward trading,” FMC chairman BC Khatua said.

“CERC has already moved the Supreme Court. We are on the drafting phase and we will also move the SC very soon. They have many issues to clarify to the FMC before the SC. But we have only the regulatory issue … we need complete regulatory authority on forward trading in electricity,” he said.

“CERC is not cooperative and very adamant on the matter,” Khatua said in an interview. Power Exchange India Ltd (PXI) had already launched forward contracts in electricity. However,FMC soon gave permission to Multi Commodity Exchange (MCX) to start forward deals in electricity. PXI complained to CERC saying that the latter is the regulator for the power sector. CERC issued an order claiming it’s the regulator for the power sector and only it can regulate forward contracts in the electricity sector. Though both the FMC and the CERC approached the Mumbai High Court,neither of them got a favourable ruling as the court said they can’t frame guidelines without the Parliament suitably amending the laws.

“We are hopeful that we will win the case as the forward market in commodities under FCRA,is completely regulated by the FMC,” Khatua said. The Forward Contract Regulation (FCRA) Amendment Bill which is pending before the Parliament is expected to clear confusion about regulation of commodity markets in India and give autonomy and teeth to the FMC,Khatua said.

On the regulatory issue of gold exchange traded funds,Khatua said the FMC was in talks with the Securities and Exchange Board of India. “Our discussion with Sebi is on and shortly we will solve the issue,” Khatua said.

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