The Hindu Business Line : FMC to fix price cap on sensitive commodities

The Forward Markets Commission (FMC), which regulates the futures exchanges, has decided to fix an upper and lower price ceiling of 6 per cent for sensitive commodities traded at the various commodities exchanges.

It has also formed a Risk Management Group to track risk-bearing trends in the market. The FMC has decided to increase penalties on members and their clients for breaching fixed open interest positions.

"We have increased penalty on members and their clients for breaching open interest positions. The limit is not breached quite often, but there is a need for more stringent measures. Members exceeding prescribed open interest positions would be levied a 2 per cent penalty on the value breached. Repeated violators would be suspended from trading,'' said Mr S. Sundareshan, FMC's Chairman.

Sugar under fire

He was briefing the press after the consultative meeting (convened by the FMC) of the representatives of trade and manufacturers' associations, chambers of commerce and commodity boards on Wednesday.

"Several members emphasised on the need for more curbs on narrow commodities trade. Most of them opined that sugar, which is under active government consideration, is not ready for trading, as it will not reflect true prices. There was no specific mention to ban any narrow commodities from trading,'' the Chairman said.

On the proposal to allow FIIs and Mutual Funds to trade in commodity futures market, Mr Sundareshan said, "we are expecting to receive the approval soon, but in the case of banks participating in commodities trade, the FMC and the RBI have to complete certain procedural formalities. The country is not ready to allow FIIs trade in agriculture.''

The regulator is in touch with various constituents of the market to expand participation in commodity futures market and create awareness about the practices prevalent there. It is holding training programmes for various segments of the market.

Regulatory measures

The FMC has taken several regulatory measures to promote market integrity, financial integrity and customer protection. "Apart from penalties on breaching open interest positions, the FMC has restricted the number of terminals a member can use for proprietary trading. This will negate unauthorised appropriations and minimise margining liabilities,'' Mr Sundareshan said.

"Futures trading in commodities has registered good growth over the last two years. Total volume of trade during the first four months of this year has been at Rs 12.61 lakh crore,'' he said.

More Stories on : Regulatory Bodies & Rulings | Commodity Exchanges

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