FMC tightens control, pens stricter penalty

Forward Markets Commission (FMC), the regulator for commodity derivatives, decided to tighten controls, which includes strict penalties and suspension of members. It also announced the setting up of an investor protection fund.

FMC had prescribed different limits on open positions of market participants in various commodities. However, the regulator said it found instances of repeated violation of the limits on open positions. As per contract specifications, such violations attract penalties, but they are not sufficient to curb such activities. "We have decided to take a serious look at it and impose strict penalties that can be extended to even suspension of member," Rajeev Agarwal, member, FMC, said.

The regulator has also decided to constitute an investor protection fund, the detailed guidelines for which will be issued to exchanges in due course. Penalties collected by the exchanges will form the corpus of the fund, which will be utilised to safeguard the interests of investors, FMC said. On Friday, FMC had asked the exchanges to withdraw the 15 per cent special margin on long positions in tur and urad futures, which it had imposed on March. 27.

FMC had directed modifications in urad and tur contracts, allowing the Indian variety for delivery and also addition of more delivery centres.

The margin has been relaxed after reviewing price and trade positions in these contracts, considering the modifications, FMC said.