M.R. Subramani

Chennai, May 18

THE Forward Markets Commission (FMC) has proposed to make registration with it mandatory to trade on commodity futures exchanges.

"No member or non-member shall enter into any forward contracts in commodities unless he holds a certificate of registration granted by the Forward Markets Commission," says FMC in its draft Forward Contracts (Members Registration) Rules 2005.

As per the proposal, existing members of various commodity exchanges have to be registered with the commission within three months from the publication of the rules. However, the deadline could be extended, if necessary, it says.

To get the registration, one should also be a member of one of the commodity exchanges and it is also necessary for the person not to have violated any rule in the exchange in which he/she is a member.

A non-corporate member, as per the draft, should have a net worth of Rs 5 lakh, while for a corporate member, the limit prescribed is Rs 10 lakh. However, the member will have access to trade only in select commodities.

In case a member wants to trade in all commodities, then the net worth limit is Rs 15 lakh for a non-corporate and Rs 25 lakh for a corporate.

The draft has higher net worth norms for those who wish to be trading-cum-clearing members.

In case, any member doesn't meet the net worth conditions, he/she will be given a year to fulfil it.

FMC has proposed to levy a registration fee for the registration. It has also come out with a code of conduct for the members. FMC has come up with the proposal to make the working of commodity exchanges uniform and in line with global norms.

The draft proposes a set of norms for proper maintenance of accounts and records, which could be inspected by an authority deputed by FMC. The rules also require the commodity exchanges to appoint a compliance officer, who will independently report to the commission.

Penal provisions in the draft include fine, suspension and cancellation of registration in case of any violation.

(This article was published in the Business Line print edition dated May 19, 2005)
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