The Forward Markets Commission is considering a slew of measures to improve the governance of and increase participation in the commodities market. “We will come out with board-of-director norms on the same lines as the current corporate governance norms and the Companies Act,” said a senior FMC official.
As a part of these guidelines, FMC will conduct a performance evaluation of all directors, including independent ones, on company boards. Also, independent directors might hold separate board meetings to decide on board decisions that might serve the interest of promoters alone.
The tenure of independent directors will be capped at five years, which can be renewed once; currently, independent directors have tenures of three years, with a renewal allowed. In an exchange, no nominee director can be appointed an independent director. Also, the board cannot appoint someone an independent director if the person is associated with shareholders of the exchange.
According to the new guidelines, every exchange should have at least one woman director on its board.
To improve participation, the FMC has decided to continue evening trade for internationally traded agri commodities. The feedback the regulator received on this matter showed foreign buyers, too, had started taking note of Indian futures for some commodities traded in evening trade, especially edible oil and cotton.
Earlier, the FMC had planned to evaluate evening trade after a month. After a review, it found there was no speculative trading on commodity exchanges. The FMC had allowed evening trade in 10 agri commodities on April 1. This led to a rise in volumes on the exchanges.
Though some quarters have opposed evening trade, “we have not found a dominating role by any player in evening-session trading in agri commodities, as alleged”, said a regulatory official.
The FMC is considering hiring 20 professionals for its surveillance team.
Last year, the finance ministry had levied commodities transaction tax (CTT) on metals, bullion and a few processed agri commodities. Subsequently, volumes took a hit. Now, the regulator has written to the finance ministry, seeking CTT be done away with, as this was hurting volumes on exchanges.
After CTT was implemented in July 2013, volumes fell 40 per cent.
WHAT THE FMC WANTS
- Performance evaluation of all directors, including independent ones, on company boards
- Tenures of independent directors will be capped at five years, which can be renewed once
- Every exchange should have at least one woman director on its board
- Continue evening trade for internationally traded agri commodities
- CTT be done away with, as this is hurting volumes on exchanges