The commodities regulator Forward Markets Commission (FMC) formally merged with the securities market regulator SEBI in Mumbai today.
Striking the gong at 10 am sharp to announce the merger, Union Finance Minister Arun Jaitley said:“These are crucial and critical times for India. While we have a history of evolving, changing and improving, we also have a history of squandering away the advantages. Now, the world sees India in a different light and even within India, the more we unleash/unlock our potential, the more we become aspirational to the extent that we are not satisfied with the 6-8 per cent band of economic growth.”
This he felt was despite India being a bright spot in the world, today.
Crediting the persons who wrote the Indian Constitution for carving out an exception (having the foresight of a deadlock in the decades to come ) by inserting the provision Article 110 which says “A Money Bill can be introduced in Lok Sabha only”, he said, was responsible for the implementation of the merger.
According to Jaitley, the ultimate objective of merging the commodities regulator Forward Markets Commission (FMC) with the securities market regulator SEBI was to reap the economies of scale and scope of markets which were borderless, global and integrated with each other.
This was because derivatives on equities and commodities were similar in nature and used for hedging and price discovery.
Reposing faith in SEBI, Jaitley said: “SEBI has now matured over the last 25 -27 years, has become an independent regulator and has the pulse of the market.”
On NSEL like scams, he observed that they were aberrations, and was confident that SEBI would handle these issues well.
He, however, felt that underlying commodities not being under the purview of SEBI would be a challenge for the markets regulator.
The Securities and Exchange Board of India (SEBI) Chairman, U K Sinha, said that the commodities market entities would get a timeframe of up to one year to adjust to the new regulations as they would have to follow the same norms that are applicable to their peers in the equity segment.
“In order to ensure that nothing is disrupted, there is no discontinuity... We are giving some timeframe so that they can adjust with the new regulations,” Sinha said.
The SEBI chief also said that the entire process has “all been very well thought out” and the regulator has also brought out a handbook for the benefit of all entities by making them aware about various rules and regulations.
SEBI's Whole-Time Member Rajeev Kumar Agarwal would oversee the commodities market regulation in the merged entity under the overall guidance of the SEBI Chairman.
At the event, the Department of Economic Affairs Secretary, Shaktikanta Das, said, “Unleashing the process of reforms is a continuous process. We don’t wait for the Budget.”
SEBI was set up in 1988 as a non-statutory body for regulating the securities markets, while it became an autonomous body in 1992 with fully independent powers.
FMC, on the other hand, has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment.
The commodities market has been known to be more prone to speculative activities compared to the better-regulated stock market, while illegal activities like ‘dabba trading’ have also been more frequent in this segment.
Besides, the high-profile NSEL scam has rocked this market in the recent past and the subsequent regulatory and government interventions in this case eventually led to the government announcing FMC’s merger with SEBI.
The announcement for the merger was made by the Finance Minister in his Budget speech earlier this year and he rung the customary bell today to formalise the merger.
This is the first major case of two regulators being merged, as against the relatively more frequent practice worldwide of creating new regulatory authorities, including by carving out new bodies from the existing entities.
At present, there are three national and six regional bourses for commodity futures in the country.
Together, all the exchanges had clocked a turnover of nearly Rs 60 lakh crore in 2014-15 from over Rs 101 lakh crore in the previous fiscal.