To discuss client code modification, transaction charges, other trading issues.
Aiming to streamline the functioning of commodity derivatives trading in India, the Forward Markets Commission (FMC) has convened a meeting of various stakeholders, including exchanges and brokers, here on Wednesday.
The important issues to come up are client code modification, uniform transaction charges and extension of trading timings in certain commodities, among others. FMC has prepared a 21-point agenda. The client code represents in whose account a transaction took place. Exchanges can change the code at the request of member-brokers. The facility was allowed only to take care of genuine mistakes. However, there is a possibility of misuse and FMC wishes to minimise this.
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According to an exchange official, the FMC believes modification in clients’ code encourages fraud in commodity business, by changing names to enable tax evasion. Code changes were rampant in the equity market, but exchanges have become cautious after the tax authorities raised the issue. It now appears the turn of the commodity market regulator to tighten the screws in the case of a request for code change.
Many exchanges take approval for a number of contracts but do not launch these for various reasons. The same exchange keeps on seeking approval for yet another commodity without proper homework. “This is a serious issue. An exchange failing to launch a contract should be asked to introduce it within a timeframe. The same exchange should not be granted approval for another contract unless the previous one is launched,” said an official of another exchange.
For improving liquidity in illiquid contracts, exchanges have suggested allowing appointment of market makers. This issue is expected to come up during the meeting.
Today, application money is not refunded in case an applicant does not get membership of the exchange for any reason.
The FMC has proposed that this be done. It is also working on proposals to launch mini contracts in agri commodities, which the regulator feels will attract retail participation. Small traders, however, do not favour this. The regulator will also discuss whether copying of successful contracts by a rival exchange should be allowed or not.
Also, FMC has outlined a discussion on trading time extension in soybean and soy oil, to 11.30 pm from 5 pm currently, as was the case till about three years earlier.
