Sebi expects FMC merger to be completed in 6-12 months

Merger will help streamline regulations and curb wild speculations in commodities, while aiding participation of domestic and foreign investors and launch of new products such as options

The capital markets regulator, Securities and Exchange Board of India (Sebi), expects the proposed merger with the commodities regulator, Forward Markets Commission (FMC), with it to be completed in 6-12 months.

While Sebi is assessing all regulatory issues and requirements for financial, infrastructure and human resources, to facilitate a smooth transition, it wants the Budget allocation provided by the government for FMC staff to continue for the next three-four years, before the regulator can generate extra resources on its own to meet costs. As such, Sebi does not get any grant from the government.

Announced by Finance Minister Arun Jaitley in the Budget for 2015-16, the merger is aimed to help streamline regulations and curb wild speculation in commodities market, while facilitating participation of domestic and foreign institutional investors and launch of new products such as options.

An official said the financial implications of the merger were still being assessed and had not been considered in Sebi’s Budget estimates for 2015-16.

Sebi will also have to acquire sufficient space for conducting FMC-related work. Recently, FMC had assessed a need for approximately 30,000 sq ft and the government had conveyed its approval for acquiring property, including one in the Air India building in Mumbai.

According to the finance Bill, Sebi will decide on the continuance of existing staff of FMC after merger. A request is being made to the government to extend the services of identified existing staff of FMC for three years.

"Further, if need arises, Sebi would also make outside recruitment to meet the requirement of experienced staff. Therefore, the Budget allocation being provided by government for the staff of FMC needs to be continued for the next 3-5 years before Sebi can generate extra resources to meet this cost," the proposal said.

Last month, Sebi had discussed the merger and the plan of action in this regard with Jaitley.

Mumbai-headquartered FMC was set up in 1953 under the Forward Contracts Regulation Act (FCRA) as a statutory body under the aegis of Consumer Affairs Ministry. It was brought under Finance Ministry in 2013.

Seeking to make FMC an autonomous body, the government had proposed amendments to FCRA in 2010 but the concerned bill could not be taken up in Parliament.