Forward Markets Commission (FMC)
The Forward Markets Commission (FMC) is a statutory body set up under the Forward Contracts (Regulation) Act, 1952. It functions under the administrative control of the Department of Economic Affairs, Ministry of Finance since September 2013. (Before this, FMC used to function under Department of Consumer Affairs, Ministry of Consumer Affairs, Food & Public Distribution, Govt. of India. Vide Gazette Notification S.O. No. 2694 dated 6 September 2013 the work related to Forward Markets Commission, Futures trading and The Forward Contracts (Regulation) Act of 1952 were shifted to Department of Economic Affairs (DEA) from Department of Consumer Affairs (DCA).) FMC has its headquarters at Mumbai and one regional office at Kolkata. The Commission comprises of a Chairman, and two Members. It is organized into five administrative divisions to carry out various tasks. However, subsequent to the passing of Finance Act 2015 and a notification to this effect, FMC ceased to exist and the responsibility of regulating commodity markets have been given to the securities market regulator, SEBI
Forward Markets Commission provides regulatory oversight in order to ensure financial integrity (i.e. to prevent systematic risk of default by one major operator or group of operators), market integrity (i.e. to ensure that futures prices are truly aligned with the prospective demand and supply conditions) and to protect & promote interest of consumers /non-members. The Forward Markets Commission performs the role of a market regulator. 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 Exchange 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.
As in September 2013, there are 22 exchanges including six 'national level' exchanges which have been recognized for conducting futures/forward trading in India. The major national exchanges are (i) Multi-commodity Exchange of India Limited (MCX) Mumbai, (ii) National Commodity and Derivatives Exchange Limited(NCDEX), Mumbai and (iii) National Multi-commodity Exchange of India Limited(NMCE) Ahmedabad. These on-line national commodity exchanges have been organized for conducting forward/futures trading activities in all commodities, to which section 15 of the Forward Contracts (Regulation) Act, 1952 is applicable, and other commodities subject to the approval of the Forward Markets Commission.
Functions of the Forward Markets Commission as defined in the FCRA, 1952 are as follows:
- (a) To advise the Central Government in respect of the recognition or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts (Regulation) Act 1952.
- (b) To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act.
- (c) To collect and whenever the Commission thinks it necessary, to publish information regarding the trading conditions in respect of goods to which any of the provisions of the act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government, periodical reports on the working of forward markets relating to such goods;
- (d) To make recommendations generally with a view to improving the organization and working of forward markets;
- (e) To undertake the inspection of the accounts and other documents of any recognized association or registered association or any member of such association whenever it considerers it necessary.
- (f) To perform such other duties and exercise such other powers as may be assigned to the Commission by or under this Act, or as may be prescribed.
Powers of the Commission as indicated in Section 4 A of the F.C.(R) Act, 1952:-
- The Commission shall, in the performance of its functions, have all the powers of a civil court under the Code of Civil Procedure, 1908 (5 of 1908), while trying a suit in respect of the following matters, namely:
- (a) Summoning and enforcing the attendance of any person and examining him on oath;
- (b) requiring the discovery and production of any document;
- (c) receiving evidence on affidavits;
- (d) requisitioning any public record or copy thereof from any office;
- (e) any other matters which may be prescribed.
- The powers of approving memorandum and articles of association and Bye-laws; powers to direct to make or to make articles (Rules) or Byelaws; powers to suspend governing body of recognized association, and, powers to suspend business of recognized association.
Merging of FMC with SEBI
In the Union Budget 2015-16, it was proposed that FMC be merged with the securities market regulator - Securities and Exchange Board of India (SEBI). Amendments to the relevant Acts were carried out through Chapter VIII of the Finance Act of 2015. With the passing of Finance Act 2015, a notification was issued to repeal the Forward Contracts Regulation Act with effect from 29 September 2015.