In a move that could debar rural farmers from futures trading platforms, the Forward Markets Commission (FMC), the commodity derivatives market regulator, has levied a penalty of 0.5 per cent on cash transactions over Rs 20,000. The penalty is effective immediately.
The FMC, in a circular to the commodity exchanges, has asked members not to accept cash from clients, either against obligations or as margin money, for trading in commodity derivatives.
The regulator has also said that all payments shall be made and received by the members from or to the clients strictly by account payee crossed cheques or demand drafts or by way of direct credits into bank accounts. The members have been told to accept cheques drawn only by clients and issue cheques only in favour of clients for transactions. However, in exceptional circumstances, members may receive the amount in cash to the extent not in violation of the provisions of the Income Tax Act (up to Rs 20,000) as may be in force from time to time.
The FMC has also authorised the exchanges to take any action they may deem fit, including levy of high fines and suspension of memberships, in case of repeated or serious violations. “We had urged the FMC to levy a penalty and not to ban cash transaction completely as the action may dissuade rural farmers from participating in the futures platform,” said Dilip Bhatia, director of Kotak Commodities Services Ltd. But the penalty was too small and might go up in future, he added.
The National Commodity & Derivatives Exchange, meanwhile, repeated that the members should execute the trade of clients only after keeping evidence of the client placing the order. The evidence could be in the form of sound recording, it said. “Our know-your-client (KYC) norms are stringent and we will not permit clients to deal in cash,” said Naveen Mathur, associate director, Angel Broking. But the regulator would have to find ways to bring those who did not have a bank account on the trading platform, he added. In June this year, the FMC had warned members not to accept cash for any dealings.
