A process ends after 12 years as FMC merges with Sebi

In the first ever instance of two national regulators merging into one, the Forward Markets Commission (FMC) on Monday merged with the capital markets counterpart Securities and Exchange Board of India (Sebi). The amalgamation was formalised by Finance Minister Arun Jaitley, who rang the customary stock market bell.

FMC, the chief regulator in the commodity markets, was set up in 1953. It was believed that the body’s lack of necessary powers became a huge obstacle in systematic working of commodities markets. It was also believed that that this lack of power led to several irregularities in the market.

By comparison, Sebi is a young organisation, set up in 1988 to regulate the securities market. The financial crisis of 1990 and the subsequent economic reforms by then finance minister Manmohan Singh created a lot of ripples in the traditional Indian market. Sebi was one of the government bodies that became partly autonomous in the aftermath and fully independent in 1992.

The talks of merging these two bodies had been going on for about 12 years. Here is a look-back at the events that led up to the amalgamation:
 
2003: The Wajahat Habibullah committee suggests making legal changes to bring regulation of commodity futures markets and financial markets under one unified entity
 
2004-05: The proposal is stalled as the United Progressive Alliance comes to power at the Centre and Sharad Pawar becomes the consumer affairs minister; Manmohan Singh (now PM) decides to stall it for three years
 
2007: The Percy Mistry committee recommends unifying all organised financial trading — in currencies, equities, sovereign and corporate bonds and commodity derivatives — under the Sebi regulation

 
2008: The PM refers the matter to C Rangarajan, whose report recommends waiting for another three years
 
2008: National Spot Exchange Ltd (NSEL) launches trading in mid-October and volumes begin to grow within a couple of years, later causing doubts among RBI officials
 
2009: The Raghuram Rajan Committee on financial sector reforms suggests consolidating all market regulation and supervision under Sebi
 
2011: RBI believes NSEL is running a scam calling it commodities trading; a committee of RBI starts raising concerns
 
2013:

* The Financial Sector Legislative Reforms Commission recommends a unified regulator for securities, commodity futures, pension and insurance markets

* A payment crisis at NSEL comes to light on July 31. The exchange suspends trading in all its contracts. It proposes a payout plan on August 14 but the commodity spot exchange is not able to make a single successful payout (not even to date). It is estimated to be a Rs 5,600-crore payment fraud

* FMC is brought under the finance ministry
 
2015:

* Finance Minister Jaitley proposes a merger between FMC and Sebi in the Budget speech on February 28

* On September 28, FMC is merged with Sebi, bringing commodities derivatives market and its brokers under Sebi norms