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After 60 years of regulatory role, FMC merges with Sebi today

FMC was set up 1953 to regulate commodities markets

Mumbai: In the first ever merger of two regulators, the 60-year-old Forward Markets Commission (FMC) will merge on Monday with the younger but much bigger capital markets watchdog Sebi to create a unified regulatory body.

The Securities and Exchange Board of India (Sebi) was set up in 1988 as a non-statutory body for regulating the securities markets, while it became an autonomous body in 1992 with fully independent powers.

FMC, on the other hand, has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment.

The commodities market has been known to be more prone to speculative activities compared to the better-regulated stock market, while illegal activities like ‘dabba trading’ have also been more frequent in this segment.

Besides, the high-profile NSEL scam has rocked this market in the recent past and the subsequent regulatory and government interventions in this case eventually led to the government announcing FMC’s merger with Sebi.

Taking forward the announcement made by finance minister Arun Jaitley in his Budget speech earlier this year, FMC would be merged with Sebi with effect from September 28. The merger would be consummated here on Monday at a function attended by Jaitley himself, along with Sebi chairman U.K. Sinha and other top officials from the government and the regulatory bodies.

This is the first major case of two regulators being merged, as against the relatively more frequent practice world-wide of creating new regulatory authorities, including by carving out new bodies from the existing entities.

Ready to regulate commodity trading, Mr Sinha has cautioned small investors against coming for quick gains through speculation in this market, saying this is “risky” and requires a lot of technical expertise.

“People will come and tell you that with a small margin, you can make a lot of money. Do not fall into the trap,” the Sebi chairman had said, even as he asserted that the capital markets watchdog was fully prepared to begin regulating commodities trading and all necessary safeguards would be put in place to keep the scamsters and manipulators at bay.

Mr Sinha said his message to the small investors would be to keep away from the commodities market as it was meant for the experts and for those seeking to hedge their risks.

( Source : PTI )
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