Press Release
1. The Forward Markets Commission together with the National Exchanges convened a meeting of the Members of the Exchanges belonging to the West Zone at Mumbai on 31st August 2007. The Meeting was inaugurated by Shri. B C Khatua, Chairman, FMC and attended by Dr. Kewal Ram and Shri. Rajeev Agarwal, Members of the Commission, senior officers of the FMC, the Commodity Exchanges and around 30 members of the Commodity Exchanges. The Commission has been holding meetings with the members of Commodity Exchanges on a regular basis to discuss various market related issues and to understand the impact of regulatory measures taken by the Commission on the Market. In the last financial year, four such meetings were held, one in each of the four zones, between FMC and the members of Exchanges.
2. In the Inaugural Address, the Chairman, FMC highlighted the objectives of holding the Members’ Meeting and the positive response received from the members in the earlier meetings. He stated that the Commodity Futures Market was preparing itself for the next phase of growth which would see greater participation of hedgers, corporate entities, exporters, processors and producers. He felt that in order to ensure greater participation in the market, there was a need for a more stringent and responsive regulation that would increase the confidence of market participants in the market, maintain financial and market integrity and discourage malpractices in the market. He underlined the recent regulatory and developmental measures taken by the Commission. While outlining the future plans of the Commission, the Chairman stated that the proposed amendments to the Forward Contracts and Regulation Act, 1952 would strengthen the hands of the Commission to effectively regulate the market. He emphasized that because of exponential growth and advent of sophisticated technology which is also available to the manipulators, the task of regulation has become very challenging. Strengthening of the legal framework which has become some what dated, will enable the regulator meet regulatory challenges thrown by the market and give quick and adequate regulatory response to the same. He emphasized the need for strengthening the corporate governance structure of the intermediaries to generate market confidence. The Exchanges and their members should not only strengthen their capital base but also put in place a comprehensive and transparent governance structure. They should also educate their clients on the risks and rewards involved in commodity trading so that the trade growth is not achieved through shortcuts but through a steady growth of awareness and responsible trading on a sustainable basis. There is also need for a constant dialogue amongst the various market participants for the healthy growth of the markets.
3. During the Technical Sessions, several issues were discussed by the participants, such as changes in contract specifications, issues in delivery and penalty for failure in delivery , position limits and linking of the same to capital adequacy, capital adequacy of members, differential margining, discussion forum for developments in trade, etc. The members provided useful insight in these areas that have been taken note of by the regulator and the Exchanges. FMC and the National Exchanges responded to the general issues raised by the participants and agreed to look into the specific suggestions raised by the members
4. The meeting is the first in a series of four meetings proposed to be convened by the FMC in the current financial year for discussing various trade and market related issues with members in different parts of the country. Besides meeting with the members, FMC also proposes to hold meetings with various other stakeholders of the industry. The Commission has already organized meetings with prominent hedgers in the commodity futures market and another with the prominent trade bodies during this year.
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Dated the 31st August, 2007
Forward Markets Commission
‘Everest’, 3rd Floor,
100, Marine Drive,
Mumbai-400 002