FMC plans to set up investor protection fund

In a bid to further strengthen the commodity markets, Forward Markets Commission (FMC) is planning set up an Investor Protection Fund (IPF) in lines of SEBI.

"This IPF will act as a supporting system," said S Sundareshan, chairman of FMC, while talking to Business Standard.

The move is expected to empower the commodity markets regulator FMC.

Sundareshan was in Gandhinagar to attend a seminar on agri-produce future market revolution organised by National Multi-Commodity Exchange (NMCE) of India.

Currently, there are trade guarantee fund with the national exchanges and adequate provisions for it.

"Introducing IPF will be our next step," Sundareshan maintained.

Talking about Forward Contract Regulation Act, Sundareshan said, "The cabinet has approved it and will be introduced in next week in the Parliament. The amendment will ensure that the FMC be given functional and financial autonomy."

FMC will soon have the status of an autonomous body like SEBI, he added.

"This move will also allow more options. Earlier options were only to curb futures," he said.

With this Act, the regulation will be tighter.

"There can be detailed regulation of the market and FMC can impose financial penalty on those found at fault."

FMC is also in the process of registration of broker members since January this year and 3,500 members have already been registered.

It is now in the process of client registration.

The exchanges will charge a nominal transaction base fee.

"In the current fiscal, the three commodity exchanges including MCX, NCDX and NMCE have registered a turnover of Rs 19 lakh crore," he said.

FMC is also set to introduce exotic products for futures like energy, electricity and weather in due course.

Talking about farmers, he expressed that spot and futures prices will be projected in real time and the final settlement price will be more transparent.

Sundareshan said, "FMC is for benefit of farmers and the 21 regional exchanges along with three national ones, trade to the tune of 11,000 crore on a daily basis."

"In all, 92 commodities are for trade in India of which, 60-80 are actively traded. This is more than US or China, which have 30 and 10 respectively. " he said.

FMC has set guidelines for regional exchanges to introduce more commodities, however, de-mutualisation is not a compulsion, he added.

The state agriculture minister Bhupendrasinh Chudasama, who was present on the occasion, said village-wise CDs and software are being prepared to guide the farmers about the use of adequate inputs.

Kailash Gupta, managing director of NMCE said maintaining the uniformity in various markets of agri-produce is essential to avail the benefits of WTO regulations and liberalisations and to maintain uniformity, futures trading is inevitable.