Traders ask FMC to impose hefty fine for delivery defaults

Written by Agencies | New Delhi, August 28: | Updated: Aug 28 2008, 22:32pm hrs
Hit hard by continuing delivery defaults in futures markets, jeera traders and exporters have asked the regulator FMC to impose stringent penalty on culprits.

They said the existing penalty of 2.5 per cent of the traded contracts is not deterrent enough.

In a letter to the Forward Markets Commission (FMC), Narayanbhai L Patel, Chairman of Agricultural Produce Marketing Committee (APMC) in Unjha, Gujarat, has requested the regulator to enhance the penalty in cumin seed (jeera) to 25 per cent or ensure 100 per cent delivery of the commodity.

He pointed out that "by paying the nominal amount of 2.5 per cent as penalty, the fake seller escapes from his responsibility".

FMC in October last year reduced the penalty charges for delivery defaults from 8 per cent to 2.5 per cent of the traded contract.

While 0.5 per cent goes to the affected party and the rest 2 per cent goes to the Investor Protection Fund of the exchange.

About 12,000 tons of jeera are traded daily at leading commodity exchange NCDEX. The volume of jeera contracts on the exchange has plunged by half to about 4 lakh tons per month from over 8 lakh tons in June last year.

"FMC has to correct the anomaly in a compulsory delivery contract," a leading jeera exporter said.

He said the low level penalty does not provide a genuine buyer the opportunity to hedge his requirement for exports.

The Mumbai-based exporter has also approached the FMC for taking necessary steps towards compulsory delivery.