Smooth functioning of these funds propels move
The Forward Markets Commission (FMC) has decided not to nominate its officials as trustees to the investor protection funds (IPFs) of commodity exchanges, taking note of the smooth functioning of these funds for years now.
In a circular, the commodity futures markets regulator said: “Now, over the years the IPF has been functioning smoothly. It is, therefore, felt that nomination of an official of the FMC as a trustee in the IPF is no longer required. Therefore, the Commission has decided to amend the guidelines.”
According to the earlier guidelines, the IPF of a commodity bourse, administered by way of a trust, comprised five trustees — the chief executive as well as one independent director of the exchange concerned, two eminent persons and an FMC nominee. Under the latest norms, barring the FMC official, the composition of the IPF would remain the same. The names of eminent persons and an independent director are required to be suggested by the exchanges and approved by the regulator.
The exchanges have now been directed to effect necessary changes in their rules, regulations and bye-laws in view of the FMC move.
While forming the guidelines on the IPFs in commodity exchanges in 2006, the FMC had said: “Investors play a significant role in the development of the commodities derivatives markets to achieve the twin objectives of price discovery and risk management. Hence, the system has responsibility to protect investors’ funds from default risk of any member of the respective exchange.” Later, the IPF guidelines were revised in 2011 as well.
At present, there are four national and six regional level exchanges in the country.