Forward mart Act amended, FMC gets autonomy

The Foward Markets Commission (FMC) has become an independent regulator after President Pratibha Patil signed the ordinance amending the Forward Contracts (Regulation) Act (FCRA), 1952, on January 31.

"We are now an independent regulator as the President has put her stamp of approval and notified the gazette. The gazette arrived yesterday," FMC Chairman B C Khatua told Business Standard.

There were no changes in the bill, he said, adding that the ordinance would be tabled as a bill in Parliament in the forthcoming budget session.

The ordinance will pave the way for introducing options trading in commodities and index-based futures and options.

"FMC and FCRA were conceptualised in the fifties. We can now introduce index-based futures trading be it the weather index or commodity specific indices. This will give due weightage to prices and volumes."

The exchanges were gearing up to start futures trading in indices, Khatua said. The regulator has also approached RBI and the Sebi for allowing banks and mutual funds to participate in commodity futures market.

The Multi Commodity Exchange (MCX) and the National Commodity & Derivatives Exchange (NCDEX) have started working on the launch of options trading in commodities as well as futures and options in indices. The introduction of options will provide traders with a cheaper hedging tool.

The amendment will increase the number of members of FMC from four to nine and also bar the employment people dealing with the commodity market or intermediaries.

The ordinance will also empower the commission to recruit its officers and employees. It also proposes to enhance the penalty for defaulters to a minimum of Rs 25,000 from Rs 1,000 at present.

It will also provide for setting up of an appellate tribunal, on the lines of the Securities Appellate Tribunal (SAT), for appealing against the regulator's decisions.