FMC to be independent regulator like Sebi

The Union Cabinet today cleared the decks for the Forward Market Commission (FMC) to become an independent regulator for the commodities futures market.

"The FMC would first be strengthened just like the Sebi has been over the years," Finance Minister P Chidambaram told reporters after the Cabinet meeting. A Bill would be introduced in Parliament during the budget session to amend the Forward Contracts (Regulations) Act.

The Cabinet's decision to strengthen the FMC puts on the back burner the earlier proposal of the finance ministry to merge the FMC with the Sebi. The Cabinet today decided to revisit the issue of convergence after three years.

"The Securities Appellate Tribunal (SAT), which hears appeals against the orders passed by the Sebi, would also take up appeals against the FMC order," Chidambaram said.

"The Bill paves the way for the FMC to become an independent and autonomous market regulator. Once the Bill is passed, the FMC would be able to generate its own resources and have the powers to recognise or derecognise futures commodities exchanges," FMC Chairman S Sundereshan told Business Standard.

The amendment Bill provides for corporatisation and demutualisation of the existing commodities exchanges and setting up of a separate 'clearing corporation'. The penal provisions in the FCRA would be strengthened to give more teeth to the commodities regulator.

Further, the amendments will allow trading in options in goods and registration of intermediaries with the FMC and redefine commodities to include energy and weather, and push forth demutualisation of regional exchanges.

The Bill seeks to strengthen the market regulator through changes in the provisions relating to composition and functioning of the FMC and provides for enhancing its powers.