FMC delays unique client code for traders

The proposed code will help regulators access trades contracted by members across commodity exchanges

The Forward Markets Commission (FMC) has decided to go slow on its move to create a unique client code for traders across exchanges, given the fall in client code modification (CCM) in the past months. While the numbers have fallen to single digit in most commodity exchanges, according to official sources, those having double-digit figures appear justified on account of their volumes.

The proposed unique client code will provide access to the regulators to view trades contracted by members across commodity exchanges. “Currently, some regional exchanges have this facility, and the same could be done for national exchanges, albeit, with adequate information technology-enabled infrastructure,” said a source close to the development.

 

At present, trades are monitored with sourcing of the permanent account number, if the regulator needs to track trades of a single member across exchanges. However, each member has a unique client code for all trades executed in a single exchange.

FMC had put in place a stringent penalty for CCM, if such requests were not backed by genuine requirements. However, in January, it reduced the minimum penalty for delay from Rs 25,000 to Rs 5,000, after the new guidelines resulted in a more than100 per cent fall in CCM across commodity exchanges within two months.

Earlier, irrespective of the value of trade, a trading member was required to pay a minimum penalty of Rs 25,000 or one per cent of the value of a modified trade, or two per cent if the value was higher than five per cent of the total turnover posted by a broker on a given day, whichever was higher.

According to informed sources, client codes were changed for trades worth Rs 1,307 crore in September. This dropped more than 100 per cent in January itself. Market sources said the misuse was mostly for tax purposes, such as, transferring a speculative loss in commodities trading from one client to another, who could offset this against a speculative gain to reduce tax incidence on the gain. To prevent a broker from transferring profits from a client account to his own account and showing his losses as those belonging to clients.