FMC

The Forward Markets Commission is a statutory body set up under the Forward Contracts (Regulation) Act, 1952. It functions under the administrative control of the Department of Consumer Affairs, Ministry of Consumer Affairs, Food & Public Distribution. In 2014, the commission was transferred to the Ministry of Finance. Headquartered at Mumbai with one regional office at Kolkata, the commission comprises a Chairman, and two members. The commission provides regulatory oversight in order to ensure

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(i) Financial integrity (i.e., to prevent systematic risk of default by one major operator or group of operators);

(ii) Market integrity (i.e., to ensure that futures prices are truly aligned with the prospective demand and supply conditions), and

(iii) Protection and promotion of the interest of consumers/non-members.

After assessing the market situation and taking into account the recommendations made by the Board of Directors of the Commodity Exchange, the Commission approves the rules and regulations of the Commodity Exchanges in accordance with which trading is to be conducted. It accords permission for commencement of trading in different contracts, monitors market conditions continuously and takes remedial measures wherever necessary by imposing various regulatory measures. At present, 113 commodities are notified for future trading and there are 21 commodity exchanges in India including three ‘national level’ exchanges (other being regional) recognised for conducting futures/forward trading. The three national exchanges are:

(i) Multi-commodity Exchange of India Ltd. (MCX), Mumbai. The FTIL, its main promoter, has been asked by the FMC to exit its ownership in it after the firm was found involved in financial irregularities mid-2013 (it has 24 per cent stake in MCX).

(ii) National Commodity and Derivatives Exchange Ltd. (NCDEX), Mumbai.

(iii) National Multi-commodity Exchange of India Ltd. (NMCE), Ahmedabad.

In US, which has the largest commodity futures market, there are separate regulators for equities and commodities. Single regulator exists in China, UK, Australia, Hong Kong and Singapore. Japan has a different model for its derivatives market, with multiple product type based regulators.

The Government of India merged the FMC with the SEBI in September 2015.