FMC sets up to prepare roadmap for common clearing system

To strengthen risk management system and reduce transaction,the group to submit reports in 10 weeks

To strengthen risk management system further and reduce in transaction cost, the commodity derivatives markets regulator the Forward Markets Commission (FMC), has formed a Working Group to prepare a road map and structure for a common clearing system (CCS) for all commodity exchanges in India.

The working group will have to submit a practical and actionable report in 10 weeks till August 31, 2014. Headed by V K Sharma, former executive director of the Reserve Bank ofIndia, the group will also have Prof Ajay Shah of National Institute of Public Finance and Policy as a member, and representatives of Department of Economic Affairs, Warehousing Development and Regulatory Authority and FMC as members of the committee.

It also includes representatives of Securities and Exchange Board ofIndia (SEBI), Indian Clearing Corporation (ICCL), The Clearing Corporation ofIndia Ltd (CCIL) and NCCL (independent clearing agency of the NationalCommodity & Derivatives Exchange) as invitees in its meeting. The group has been assigned to examine the feasibility of setting up of a CCS for all commodity exchanges and review the existing risk management system.

Additionally, the committee will also submit report on setting up a common repository for keeping electronic record of warehouse receipts and acommon infrastructure facility such as warehouses, as sayers, elevators or aggregators to facilitate delivery of right quality and quantity of commodities for settlement of trade.

Examination of the feasibility of fungibility of warehouses goods to be delivered against the settlement of trade across exchanges will also be on agenda of the working group which will also suggest means to make finances available against warehouse receipts in futures markets.