Commodity markets regulator FMC has allowed national level bourses to impose differential transaction fees for delivery and non-delivery based commodities contracts.

Since 2009, the exchanges have been restrained from levying differential transaction charges based on commodities or timing.

“In suppression of the earlier directions, the Commission has now decided that the exchanges can levy differential transaction charges for different commodities,” Forward Markets Commission said in a directive issued to six national level commodity bourses.

This step will ensure greater efficiency and allow market participants to derive the benefit of lower costs, it said.

The national exchanges — MCX, NCDEX, NMCE, ICEX, ACE and UCX — are directed to incorporate the directions and submit the compliance report by February 20, it added.

The new direction follows representation suggesting differential transactions fee for delivery based and non-delivery based commodities contracts, because exchanges need to make substantial investments for providing an efficient delivery mechanism by way of warehousing and infrastructure.

According to FMC, there is merit in implementing a differential transaction charge structure because the cost of offering delivery based contracts is substantially higher than the cost of offering non-delivery based contracts.

There is also a need to promote competition in the market to bring in greater efficiencies and lower transaction costs to market participants, it added.

Analysts said this is a good step taken by FMC towards giving greater freedom to exchanges in routine matter.

(This article was published on February 16, 2014)
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