Govt revives proposal to merge FMC with Sebi

The government is considering a proposal to merge commodity market regulator Forward Markets Commission (FMC) with capital market regulator Securities and Exchange Board of India (Sebi) to ensure better monitoring of the futures market.

"One of the options being considered by the government is merging FMC with Sebi," a senior finance ministry official said.

Forward trading in commodities is also an activity connected with the capital market and a kind of financial transaction, which justifies the merger, the official said.

Besides, the Financial Sector Legislative Reforms Commission (FSLRC) has recommended bringing all the financial transactions under one regulator (barring banking which will continue to be regulated by RBI).

''You may call it (SEBI-FMC) merger as first legislative action for FSLRC recommendations,'' he added.

In September last year, the government had brought FMC under the ambit of the finance ministry in the aftermath of the Rs5,600-crore payment crisis at the National Spot Exchange Ltd (NSEL).

Alternatively, the government may also pursue the long-pending proposal to give more powers to FMC by amending the Forward Contract Regulation Act (FCRA) Amendment Bill.

FMC was earlier under the ministry of consumer affairs.

While FMC is the regulator for commodities trading, while the Sebi regulates the capital markets.

The move would also help in improving the regulatory architecture for the futures commodity trading.

Earlier the Financial Sector Legislative Reforms Commission (FSLRC) had recommended that Sebi, IRDA, PFRDA and FMC should be merged into a single entity into a unified financial agency (UFA).

Meanwhile, forward trading in commodities market is facing tough time as volume has dipped to five-year low.

Besides the NSDL incidence, imposition of Commodities Transaction Tax (CTT) and shifting of investors from commodities to equity have affected commodities futures trading.

Forward trading volume in commodities during the first fortnight of September stood at Rs2,49,000 crore, which is nearly 25 per cent less than that of the corresponding period of the previous fiscal.

Currently, there are 6 national and 16 regional exchanges, according to FMC.