Commodity derivative brokers will get three months to register with the Securities and Exchange Board of India (SEBI) after its merger with the Forward Markets Commission (FMC). The Finance Ministry has also proposed giving discretionary power to SEBI to grant approval for new activities to be undertaken by commodity exchanges.

Finance Minister Arun Jaitley, on April 29, added two more provisions in the Finance Bill in the clause related with the SEBI-FMC merger. Later, the Lok Sabha gave its nod to the Bill. Once the Rajya Sabha returns the Bill and the President gives his assent, it will become law. After that, the merger is expected to be completed in 6-12 months.

As per the addition related to registration, “A person buying or selling or otherwise dealing in commodity derivative as a broker, or such other intermediary who may be associated with the derivatives market, immediately before the transfer and vesting of rights and assets (of undertaking of the Forward Market Commission) to the SEBI for which no registration certificate was necessary prior to such transfer, may continue to do so for three months from the transfer, or, if he has made an application for such registration within the period of three months, till the disposal of such applications.”

Currently, the FMC has the power to suspend errant members of commodity exchanges, but it lacks the power to register members or investigate, enforce or levy penalty, like SEBI. All these will be part of the new regime.

Last August, the Finance Ministry had issued draft ‘Forward Contracts (Regulation) (Intermediaries) Rules, 2014’ that prescribed mandatory registration and de-registration of commodity brokers.

The Finance Bill has proposed that after the merger, all commodity exchanges providing trading facility in derivative trading will be deemed to be recognised stock exchanges under the Securities Contracts (Regulation) Act, 1956. These exchanges will be given time to comply with the regulations prescribed for a stock exchange.

However, being eligible does not mean one can lay claim on providing any new trading platform. Keeping this in mind, a new provision has been added in the Bill, which says, “Such deemed stock exchanges will not carry out any activity other than the activities of assisting, regulating or controlling the business of buying, selling or dealing in the commodity derivatives till the said deemed recognised stock exchanges are specifically permitted by the SEBI.”