Scams are good. The 1992 Harshad Mehta scam saw the securities market regulator emerge as a strong watchdog, empowered by Parliament. Two decades later, the spectacular scam at the National Spot Exchange (NSEL) has done something similar to the commodities market regulator Forward Markets Commission (FMC).
The sheer size of the scam at Rs 5,600 crore and the immensity of the cleaning exercise seem to have injected some energy into the corridors of 'Everest', the Marine Lines building housing the regulator.
Soon after the scam broke, in September, the regulator was taken over by the finance ministry. This in itself was a good move, as the consumer affairs ministry did not cover itself in glory in the way it let the problems in NSEL, that it came to know as early as February 2012, fester and balloon into a major crisis.
First, the chairman of FMC has been accorded better financial powers, at par with the secretary in a ministry. This allows better functional autonomy, as the regulator need not run to the ministry for every work. It frees the regulator from the clutches of the ministry to that extent.
Second, the regulator, which now runs on skeletal staff, most of whom are generalist bureaucrats, is likely to get more personnel, particularly experts in the field of commodities, finance and law. It relies heavily on committees comprising external experts for decisions on key issues. In-house experts will come handy in formulating guidelines and taking enforcement action.
Thirdly, the watchdog is looking forward to getting more information and communication technologies (ICT) systems, which will help in surveillance and early detection of troubles. It won't be a bad idea to invest in an integrated market surveillance system that monitors each and every trade and throws up red flags. This will help the regulator take an independent overview of the market, rather than rely on data given by the recognised entities.
All these cannot be stuffed into the cramped 'Everest' office. So, FMC is set to move into a modern office, probably up northwards in the city where there is more space available for lesser money.
Then, FMC can take steps to develop the market by easing the operational bottlenecks that affect genuine participants. At the same time, it has to discourage and punish questionable elements lurking around for money laundering, cheating and anything other than genuine commodities trading.
Finally, though the regulator will look much better than it did a few months ago, it still won't look complete unless it gets the powers to make rules and regulations. The new Forward Contracts Regulation Act, kept pending for years now, has to be passed in 2014. Let us hope the new government that comes in the new year has the resolve to pass it.
After all these changes, FMC is likely to become as strong and as powerful as the Securities and Exchange Board of India. the Financial Sector Legislative Reforms Commission says both have to be merged. It is easier to merge similar structures. Scams are good.
The sheer size of the scam at Rs 5,600 crore and the immensity of the cleaning exercise seem to have injected some energy into the corridors of 'Everest', the Marine Lines building housing the regulator.
Soon after the scam broke, in September, the regulator was taken over by the finance ministry. This in itself was a good move, as the consumer affairs ministry did not cover itself in glory in the way it let the problems in NSEL, that it came to know as early as February 2012, fester and balloon into a major crisis.
More From This Section
The capital markets division of the finance ministry has consequently been renamed financial markets division. There are more important changes, some done and some in the pipeline, that bode well for the commodities market in 2014.
First, the chairman of FMC has been accorded better financial powers, at par with the secretary in a ministry. This allows better functional autonomy, as the regulator need not run to the ministry for every work. It frees the regulator from the clutches of the ministry to that extent.
Second, the regulator, which now runs on skeletal staff, most of whom are generalist bureaucrats, is likely to get more personnel, particularly experts in the field of commodities, finance and law. It relies heavily on committees comprising external experts for decisions on key issues. In-house experts will come handy in formulating guidelines and taking enforcement action.
Thirdly, the watchdog is looking forward to getting more information and communication technologies (ICT) systems, which will help in surveillance and early detection of troubles. It won't be a bad idea to invest in an integrated market surveillance system that monitors each and every trade and throws up red flags. This will help the regulator take an independent overview of the market, rather than rely on data given by the recognised entities.
All these cannot be stuffed into the cramped 'Everest' office. So, FMC is set to move into a modern office, probably up northwards in the city where there is more space available for lesser money.
Then, FMC can take steps to develop the market by easing the operational bottlenecks that affect genuine participants. At the same time, it has to discourage and punish questionable elements lurking around for money laundering, cheating and anything other than genuine commodities trading.
Finally, though the regulator will look much better than it did a few months ago, it still won't look complete unless it gets the powers to make rules and regulations. The new Forward Contracts Regulation Act, kept pending for years now, has to be passed in 2014. Let us hope the new government that comes in the new year has the resolve to pass it.
After all these changes, FMC is likely to become as strong and as powerful as the Securities and Exchange Board of India. the Financial Sector Legislative Reforms Commission says both have to be merged. It is easier to merge similar structures. Scams are good.