FMC cracks down on illegal trading, conducts raids

The Forward Markets Commission (FMC), the commodity markets regulator, raided offices of Praful Jain, a dabba trader based in Kalbadevi here on Saturday in a joint action with the local police.

According to a senior FMC official, the police detained four people involved in illegal activity in commodities and seized two hard disks, three mobile phones, some objectionable documents and Rs 20,000 cash.

The development assumes significance as the regulator has been working overtime to bring down abnormal price volatility in agri commodities for which FMC was blamed for late action. Recently, industry bodies, like Assocham, had also alleged that the price spike in most of agri commodities is purely driven by speculators who remained out of FMC’s control.

 

Dabba trading is a system of executing orders in physical market based on price movements in futures market. Since, dabba trading records are not included in the official trading of exchange system, such trading is banned under the Forward Contract (Regulation) Act 1952 (FCRA).

The Mumbai police has registered case for violation of section 20 and 21 of FCRA while the main operator Praful Jain went absconding.

Dabba trading is rampant in minor commodities including mentha oil for which FMC had raided many traders in Uttar Pradesh in the past months.

A Dabba operator flouts rules and regulations relating to Client Protection, which includes registrations, margins, transaction, execution and settlements. Not only he evades the income tax regulations, which prohibit dealings in cash, but also service tax rules and many other mandatory requirements.