Rules are part of everyday human life and we find them in schools, at work place, and in general society. Rules are like guidelines, and help people to understand what is acceptable and what is not. Without rules, the world would probably be chaotic.
Similarly, our financial system is also regulated by independent regulators in the field of banking, insurance, capital market, commodities market and pension funds.
The Reserve Bank of India regulates the banking system, while Securities and Exchange Board of India (SEBI) regulates the securities market. The Insurance Regulatory and Development Authority (IRDA) regulates the insurance sector.
However, many of us are not aware about who regulates the commodity market in India? Just as SEBI regulates the stock market, Forward Markets Commission (FMC) regulates the commodity market.
Let's try to know more about FMC and its role.
FMC: Commodity regulator
Headquartered in Mumbai, FMC is a regulatory authority for commodity futures market in India. FMC is the chief regulator of forward and futures markets in India. FMC comes under the Ministry of Consumer Affairs, Food and Public Distribution because futures traded in India are traditionally in food commodities.
FMC is a legal body set up under Forward Contracts (Regulation) Act 1952. The Act provides that the Commission should consist of minimum two and maximum four members appointed by the Central Government. The chairman of the FMC is nominated by the central government.
At present five national exchanges, viz. Multi Commodity Exchange, National Commodity and Derivatives Exchange, National Multi Commodity Exchange, Indian Commodity Exchange Ltd and ACE Derivatives and Commodity Exchange, regulate forward trading in 113 commodities. Besides, there are 16 commodity specific exchanges recognised for regulating trade in various commodities approved by FMC under the Forward Contracts (Regulation) Act, 1952.
Commodities traded on these exchanges comprise:
- Edible oilseeds: Groundnut, mustard seed, cotton seed, sunflower, rice bran oil, soy oil, etc.
- Food grains: Wheat, gram, dals, bajra, maize etc.
- Metals: Gold, silver, copper, zinc etc.
- Spices: Turmeric, pepper, jeera etc.
- Fibres: Cotton, jute, etc.
- Others: Gur, rubber, natural gas, crude oil etc.
Functions of FMC
- To advise the central government in respect of the recognition or the withdrawal of recognition from any association.
- To advise the central government in respect of issues arising out of the administration of the Forward Contracts (Regulation) Act 1952.
- 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 under the Act.
- 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.
- To make recommendations to improve the organisation and working of forward markets;
- To undertake the inspection of accounts and other documents of any recognised association, registered association or any member of such association whenever it considers it necessary.
FMC has powers of deemed civil court for
- Summoning and enforcing the attendance of any person and examining him on oath.
- Requiring the discovery and production of any document.
- Receiving evidence on affidavits.
- Requisitioning any public record from any office.