The much-anticipated merger of the Forward Markets Commission with SEBI is set to get formalised from September 28. The government will soon issue a notification in this regard for market participants, including exchanges, intermediaries and members to prepare for the transition, said sources in the government department.

Belying commodity market expectations, SEBI does not appear to be in favour of introducing new products, such as options and trading on indices at least for one year from the day FMC-SEBI comes into effect, he said. The capital markets regulator SEBI has been working on the merger for the last six months and the commodity exchanges have made separate presentations on their operations to the new regulator.

Incidentally, the SEBI board will meet on September 24 to discuss progress on the merger, regulatory changes needed in commodity market and various other issues.

Debate since 1997

Though the idea of a unified regulator has been debated within the government since the 1997 Asian currency crisis, the final decision came without much fanfare given the fact that it is the first ever merger of regulators in the country.

During the presentation of the last Budget, Finance Minister Arun Jaitley almost innocuously said that he proposes to merge the FMC with SEBI to strengthen regulation of commodity forwards market and reduce wild speculation.

Ever since the merger of the regulators was announced, the commodity market has been wild with expectations that market participation would be widened with banks and financial institutions also being permitted to invest in commodity futures. The three national commodity exchanges, which have seen a sharp drop in turnover, are banking on the launch of new products for trading.

Commodity derivative

Speaking at an event, UK Sinha, Chairman, SEBI, recently said worldwide, there is ‘hardly any instance’ of two regulatory bodies being merged, such as being done in India. After completion of the merger, SEBI would work on commodity derivatives, he added.