Forward Markets Commission set to get sharper teeth

The government on Thursday gave the commodities market a much-needed shot in the arm by making its regulator, the Forward Markets Commission (FMC), an autonomous body. The Cabinet has decided to issue an ordinance that will lend greater powers to the commission to supervise India’s commodity trading market, expected to touch $1 trillion by 2008-09. The ordinance will amend the Forward Contracts (Regulation) Act (FCRA), 1952 to give FMC the power to decide on the listing and de-listing of commodity bourses, as well as give approval to exchanges to start options trading.

“After an ordinance, a Bill will be brought in Parliament to make the FMC an autonomous and independent body in the Budget session,” parliamentary affairs minister Priyaranjan Dasmunsi said at the Cabinet briefing.

Development of commodities market has been an erratic affair. During each bout of inflation, politicians have blamed futures trading in commodities, especially agricultural, for the price rise.

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FMC’s new powers will include the right to undertake search and seizure operations and initiate steps to stop illegal futures trading. Unlike stock market regulator Sebi, which derives its powers from parliamentary legislation, the food & consumer affairs ministry currently controls FMC. This means the government has a final say in most of its decisions.

The ordinance proposes to increase number of members on the FMC from four to nine, including at most three full-time members and a chairman.