Regulator warns three others for committing serious violations

Our Bureau

Mumbai, Dec. 4

The commodity futures market regulator, Forward Markets Commission (FMC), has suspended four members from all recognised commodity exchanges for breaching trading norms and has prohibited them from entering into any forward contract for sale or purchase of goods. The FMC has also warned three members for committing serious violations.

Mr Sushilkumar Ratanlal Khowal and BM Agro Industries Ltd have been suspended for a week from January 9, while Madhya Bharat (International) Ltd and Dayal Agro Products Ltd have been suspended from January 9 for three days.

The FMC has also warned Globe Comex Ltd, Bhagyashree Commodity and Derivatives Ltd and Kunvarji Commodities Brokers Ltd.

"The suspended members have been breaching open interest position for the last 10 months across products. The action has been taken after considering the seriousness of the violations," said Mr Rajeev Agarwal, Member, FMC.

The regulator has been warning commodity traders to stick to open interest limits after commodity prices turned volatile.

Open interest limits refer to the maximum trading positions that a member can hold in a commodity.

The FMC has also told the exchanges to withhold the profits from breach of open interest positions during the last five days before the expiry of contracts and levy an additional penalty of Rs 2,500 per day.

The recent rise in prices (spot and futures) of maize, chana, tur, urad, chilli, guar, turmeric, wheat and sugar has placed the FMC in an uncomfortable position.

For instance, maize futures on the NCDEX have risen from Rs 755 per quintal on November 1 to Rs 802 on November 28, touching a high of Rs 830 on November 10. Sensing speculation, the regulator told exchanges to cut total open positions in maize futures contracts to 30,000 tonnes for members and 10,000 tonnes for clients (retail players). The open position for the near month (December) has been limited to 6,000 tonnes for members and 2,000 tonnes for clients. It will be effective December 21 for contracts expiring in January 2007 and thereafter.

The FMC has also marked up margins by nine per cent to 20 per cent on all running maize contracts.

(This article was published in the Business Line print edition dated December 5, 2006)
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