Norms for advisory services soon: FMC

The Forward Markets Commission (FMC) Chairman S Sundareshan said the commodity markets regulator will issue guidelines for advisory services in commodity futures as quickly as possible.

Addressing mediapersons here on Friday, the chairman said the FMC had so far not issued guidelines for advisory services and brokers are not entitled to do so under any circumstance.

However, portfolio management services will not be allowed in commodity futures trading, as this will endanger the functioning of the market. Unlike securities trading, commodity futures is sensitive and the FMC will closely watch the movement of the market in the light of some recent issues, he said.

It has come to the notice of the FMC that some brokers had collected money for portfolio services, which they are not allowed to do.

Hence, the regulator has warned the members of exchanges not to offer portfolio services, he added.

The chairman said the contracts of non-trading and marginally traded commodities have been extended till June next year. A decision on the trading in these commodities will be taken after June. A total of 90 commodities have been allowed to trade in the futures market and the FMC has no reservations on continuing with the present product portfolio and starting trade in new commodities.

Sundareshan hoped the Forward Contracts (Regulation) Amendment Bill would be enacted in the next session of the Parliament, as the draft Bill is under the consideration of a Parliamentary committee.

The main objective of the Bill is to empower the FMC to regulate the market in a better manner. A proposal for allowing entry to FIIs, mutual funds and banks in futures trading is also under the consideration of the Cabinet and a decision is expected soon, he added.

"This (the entry of FIIs) is not connected with the amendment of the Act. But, we will not permit their entry in agro-commodities in the first phase. They will initially be allowed only in bullion, crude oil and metals. For agro-commodities, there should be the enactment so that the FMC can regulate the market tightly," he said.

He further added that the FMC had not received any complaints about price manipulation and clarified that one cannot stop speculative trading in the market.

"We cannot compare speculation with manipulation of prices. Speculation is an active component of the market, which creates position in trading. Otherwise, the very existence of futures market will be difficult," Sundareshan said.