FMC steps up futures' monitoring

The Forward Markets Commission (FMC) has stepped up its surveillance of the futures market while awaiting punitive powers through the amendments tabled to Forward Contracts (Regulation) Act.

It has decided to incorporate a market monitoring surveillance system, with inbuilt alerts on odd market deals unaligned with the predefined norms and rules. It has formed an internal committee to decide on the technological bidders for these operations.

It has also started joint surveillance with the equity markets regulator, the Securities and Exchange Board of India (Sebi). Official sources said due diligence for every firm or entity that applies for any commodity-related activity or commodity trading in the forward market will be done in coordination with Sebi. Till now, Sebi was brought in only if there was a complaint or query.

Now this will be the norm, they explained. “It will be a member-level due diligence for the firm, to be conducted before granting exchange membership for trading,” said official sources. Before granting a membership, the record of the firm in its other market activities will be conducted with the help of Sebi. This measure comes at a time when the United States commodity futures trading commission is preparing to implement a new law, the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill aims to regulate swap dealers, increase transparency and improve pricing in the derivatives market.