The finance ministry is favouring an option to make the Forward Markets Commission (FMC) a division of the Securities and Exchange Board of India (Sebi) instead of keeping the commodity futures markets regulator as a separate watchdog, a senior government official said on Wednesday.
“Making the FMC a division of Sebi will require Parliamentary approval. So we are also drawing a plan to get this approval. Our view has always been that commodity derivatives, being financial products, should be under the ambit of the capital market regulator,” the official told FE. While Sebi has been under the administrative control of the finance ministry, the FMC has now been shifted to the control of the finance ministry from the consumer affairs ministry.
Although the finance ministry has not yet junked the option of keeping the FMC as a separate regulator under its purview, it is increasingly coming to the conclusion that making the commodity futures market regulator an arm of Sebi is a better option, sources said.
Senior finance ministry officials will soon meet their counterparts in the consumer affairs ministry to have comprehensive discussions on the current workload of the FMC, among other operational procudures, the sources said.
The shifting of the FMC to the purview of the North Block will, of course, requiring opening up new posts within the ministry, one of them added.
Last month, amid a settlement crisis at the National Spot Exchange (NSEL), the Cabinet secretariat had sought the finance ministry’s opinion on whether commodities derivatives be brought under the latter’s control and the ministry responded, saying it had been its view since 2006 that these derivatives, being financial products, should be under the Sebi ambit.
The rationale is that placing the FMC under the control of the finance ministry, which already oversees the functioning of several regulators such as Sebi, Irda and PFRDA will result in better co-ordination among watchdogs.
In 2009, the finance ministry had also suggested bringing in the FMC under its control but this didn’t happen due to the strong resistance from the consumer affairs ministry as well as the commodity futures market regulator.
The latest move came amid an escalation of a contract settlement crisis at NSEL after members of the bourse defaulted on payment for a fourth time in a row on Tuesday.
Meanwhile, two working groups set up to probe the NSEL settlement crisis are set to submit their reports to the economic affairs secretary Arvind Mayaram, who heads a panel of secretaries looking into the spot exchange crisis.
Earlier, the FMC had said the promoters of NSEL are at risk of losing their fit-and-proper tag.
Members of NSEL had defaulted on the payment for a fourth week in a row.
