The Forward Markets Commission (FMC) is facing allegation of taking late actions in guar when speculators made their profits and exited. Ramesh Abhishek, the chairman of the commodity derivatives market regulator denies such late action in an interview with Dilip Kumar Jha. Excerpts :
There is a lot of allegation against FMC for late action in guar futures ?
We are taking all possible regulatory steps under the framework of the Forward Contract (Regulation) Act since the matter emerges to deal with the situation. We also imposed the cash margin of 60% in buy side which combined with initial margin became 73% in buy side. We reduced the speculative position limits and also changed clubbing guidelines which brought lots of third party transactions into light and exchange could cut their position. We did investigations, suspended traders. We approved the exchange request for reducing lot size. We took drastic action of no fresh position would be taken for both January and March contracts also. It is a continuous process and phasewise response of the Commission. I do not agree that the Commission has been late in taking action. Suspension of trading in a commodity is not a step, which can be taken right away whenever there is a possibility of manipulation or price rise. That could be the last step.
There is rampant speculation in commodities like chana and R M Seed. Are we going towards guar way for these commodities also ?
We have asked exchanges for effective monitoring and surveillance for agri commodities in particular and we are keeping a close watch on it. We have asked commodity exchanges to provide details of market–to–market (M2M) beneficiary account for the last six months in highly liquid farm commodities including potato, guar, chana, RM seed, cardamom, mentha oil, pepper and soybean.
Guar contracts are closed out. What is the way forward ?
All guar contracts are suspended for the current season until September. For the next season, however, exchanges would require fresh approval from FMC to launch contracts for the next season beginning October. There is a wide difference between guar seed stocks in NCDEX warehouses and open interest on exchange platform. We have closed out the contracts for the current season. Those who have short position, they would require to deliver the commodity. For this season, there will be no futures in guar gum and guar seed. We will see during the next season.
Do you think a short period of three months is enough to bring down Kailash Gupta – promoted Neptune Overseas Ltd (NOL) stake in National Multi Commodity Exchange (NMCE) post your victory in the Supreme Court recently ?
The Supreme Court in an interim order has stayed earlier order of the Gujarat High Court in which Kailash Gupta had been granted partial relief. With this, the July 2011 order of the FMC gets restored naturally. The interim order is subject to the final order set to be passed by the Supreme Court after six weeks from March 23. We will have to wait for the final decision of the court. So whatever would be the implications of the order, one will have to follow. Three months would have been given in pursuance with the FMC order on July 23, 2011. Now, lots of time has passed. Hence, we would have to examine how that works.
Is there any extension planned ?
We have not received any formal request from any quarter that they need more time to divest. Hence, the issue is hypothetical.
In order to avoid distress sale, if NMCE approaches you, would you consider the request?
We will have to examine after receiving a proposal.
What is the status of United Commodity Exchange ?
They have sought little more time for complying with the guidelines of a national exchange. They have told us that they have completed with the paid up equity requirement. We are expecting that they would submit a proposal in the next few days.