The amalgamation of Forward Markets Commission
(FMC), the erstwhile commodities regulatory body, with capital markets watchdog
Securities and Exchange Board of India (SEBI) came into effect today, marking
the first major case of 2 regulators being merged.
Although, the merger of these 2 independent
regulatory bodies was under discussion for long time, the move gathered pace,
especially, after the commodity market was rocked by the outbreak of a
multi-crore scam at National Spot Exchange (NSEL) unearthed 2 years back.
Now that the merger has been done with, below is
the draw down of the journey of the commodities regulatory body & what led
to the eventual covergence with the capital markets regulator SEBI.
(1) History of the 2 Regulatory bodies..!
The Forward Markets Commission regulated
commodities market since 1953, while the Securities and Exchange Board of India
was set up in 1988 as a non-statutory body for regulating the securities
markets and became an autonomous body in 1992 with full independent powers.
Currently, India boasts of three national and 6
regional bourses for commodity futures in the country. The persisting global
economic slowdown coupled with slackening growth in China fuelled a sharp fall
in commodity prices over the past year or so. So, much so that the consolidated
turnover of all the exchanges put together fell to nearly Rs. 60 lakh crore in
2014-15 from over Rs. 101 lakh crore in the preceding financial year.
(2) Issues stifling commodities markets..!
FMC oversaw the commodities market for over 60
years, but it lacked powers which led to wild fluctuations and alleged
irregularities remaining untamed in this market segment.
Also, the commodities market faced challenges
with respect to speculative activities and illegal activities like 'dabba
trading' flourishing in this segment.
Cautioning small investors, SEBI chairman Mr. UK
Sinha had once said, "If you put your hard-earned money into this market,
it may not be ultimately good for you. The commodities market is for those who
are experts in this space. For non-experts, it is a risky area."
(3) Talks of merger..!
The merger talks between the two regulatory
bodies was first mooted in 2003, and continued in next few years before the
Rajan committee in 2009 reiterated consolidation of all financial sector
regulators under one umbrella.
In the events before the outbreak of NSEL crisis
came to light, Justice BN Srikrishna-led FSLRC recommended unified regulation.
But, the fallout of NSEL prompted finance
ministry to bring FMC under its fold in that same year. Finally, in his budget
speech this year in February, finance minister Arun Jaitley announced the
merger of FMC with SEBI.
(4) What merger aims to achieve..!
The merger is aimed at streamlining the
regulations and curb wild speculations in the commodities market, while
facilitating further growth there.
“The merger will increase economies of scope and
economies of scale for the government, exchanges, financial firms and
stakeholders,” finance minister Arun Jaitley has been quoted as saying in
reports.
The
minister also promised a more steps measures to further develop the market. He
said there is no reason why the commodities market should not have options or
index futures. He also said in future banks and foreign portfolio investors
will also be allowed to participate in the markets.
(5) Measures by SEBI..!
SEBI has
also created a separate Commodity Cell and has set up new departments for
regulation of commodities derivatives market. SEBI has formed a Commodity Cell
by posting its senior officials, while 2 internal departmental committees (one
each in Integrated Surveillance Department & Market Intermediaries
Regulation and Supervision Department) have been set up.
The market regulator has also sought help from
the Agriculture Ministry with regard to the data sources for the prices and to
improve the methodology for determination of final settlement price. It will
also give up to one year time for those in commodities market to adjust to new
regulations.
Src: Firstpost With inputs from PTI
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