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Consumer Affairs Minister K V Thomas is expected to table the much-awaited amendments to the Forward Contracts (Regulation) Act, 1952 (FCRA) in the Lok Sabha tomorrow. The amendment Bill was cleared by the Union Cabinet in October last year. The amendments will seek to give more powers to the commodities market regulator, Forward Market Commission (FMC), and open the door for introduction of new products like options and indices trading in the commodities futures market.
Simultaneously, amendments to the Securities and Exchange Board of India (Sebi) Act, 1992 to bring it in line with the FCRA is also expected to be tabled in Parliament tomorrow. The FCRA Bill says the Securities Appellate Tribunal (SAT), set up under the Sebi Act will be the appellate authority for the commodity derivatives market as well and hence to give effect to this provision, the Sebi Act is also being amended.
“The item has been listed in the list of business for tomorrow,” a senior official said. Another official source said the government seems determined to get the FCRA Bill cleared. After the Bill is passed, a member will be appointed on SAT to hear commodity derivative cases. The person to be appointed to the position has already been identified.
A standing committee of parliament in its report on amending the FCRA had suggested greater autonomy for FMC. FMC also regulates spot online commodity exchanges — Financial Technologies-promoted National Spot Exchange Ltd (NSEL) and the National Commodity & Derivatives Exchange-promoted NSpot.
The standing committee had also suggested allowing financial institutions and banks, mutual funds and insurance companies to participate in forward markets so as to ensure better price discovery and lower volatility. The amendments seek to change some of the definitions mentioned in the earlier law, which would facilitate futures trading in index and also options trading in individual commodities and index. At present, in the equity markets trading is allowed in stocks, futures and index.
The amendments to FCRA were first cleared through an official ordinance; however it lapsed as the 14th Lok Sabha could not clear the Bill due to opposition from Left parties.
Thereafter, the Cabinet once again cleared the amendments to the Act in September 2010 and introduced the Forward Contracts (Regulation) Amendment Bill, 2010 in Parliament. Following this, the draft Bill was referred to a standing committee of Parliament for vetting. Experts said the main beneficiaries of the reforms will be companies that produce commodities or use these as raw materials, since options would provide them with more security in volatile markets.
