Broker expelled by one commodity exchange stands expelled in all: FMC

The commodity futures marker regulator the Forward Market Commission (FMC) has said any member expelled from one national commodity exchange stands expelled from other commodity exchanges too. However, the exchange has made it clear that expulsion from any stock exchange will not lead to expulsion from comex.

According to a communication sent to all the six national commodity exchanges, the regulator said, “In case of expulsion of a member from one commodity exchange, such member would  ipso facto  stand expelled from all other commodity exchanges where he is a member.” It also asked the concerned exchange to intimate others about the expulsion of such member and should also display the name of the expelled member on their Web site for public information.

FMC has taken this decision on the basis of representations from exchanges and members about practices followed in the securities markets, wherein suspension of a member is confined only to the the exchange concerned, while a member expelled by one exchange will stand expelled from all other exchanges where he/ it is a member.  At present, there are six national commodity exchanges and 14 regional exchanges.

However, the regulator said in case a member is suspended or debarred by a stock exchange, such action will not lead to suspension of the member from any of the commodity exchanges. Here the argument is that members or brokers trading on the commodity exchanges cannot be the same entity, which is a member or broker of a stock exchange.

The regulator also clarified that disciplinary action taken by a commodity exchange against a member in the form of reprimand, fines, warning and suspension may be confined only to the commodity exchange which has taken such action. “However, the concerned commodity exchange shall intimate the other commodity exchanges about such action taken against the member,” it said while adding that the concerned exchange should also display the name of such member on their Web site for public information.

Commodity exchanges are passing through tough times as the transaction cost has gone up while trading volume is down. The National Spot Exchange Ltd (NSEL) episode has also impacted the trading of commodity futures. The latest FMC data says that the total value of trade during the fortnight ending June 15 dipped to Rs 2.14 lakh crore from Rs 6.20 lakh crore during the first fortnight of June in 2013-14, a reduction of over 65 per cent.

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