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The Forward Markets Commission (FMC) has decided to levy a penalty of up to five per cent on members of national commodity exchanges failing to collect the required margin money. Incorrect reporting will attract a 100 per cent penalty on the shortfall.
“During inspection of books of accounts of members and during enquiry and investigation,” explained the commodity futures markets regulator, in a reference to the sequel of the National Spot Exchange payments scam, “(we) noticed several instances of non-collection or short collection of margins by members from their clients. Therefore, penalty will be levied on members of comexes for short or non-collection of margins from clients beyond T+2 working days.” The latter reference means it has permitted members to collect the margin money from clients within two days of putting through the trading order (T+2).
Effective April 1, it has prescribed a penalty of one per cent of the shortfall amount on each day for a client continuing more than three consecutive days of lower margins. In non-collection, the penalty structure would be applicable from the first day of trading. The regulator has directed exchanges to put in place a mechanism to enable members to report the collection of all margins from clients at the end of each trading day and report any shortfall within five days (T+5) of trading to the exchanges.
FMC has clarified that all instances of non-reporting of shortfall will be treated as non-collection, with the required penalty. For those defaulting thrice or more in a month, the penalty would be five percent of the shortfall. It shall be collected by the exchanges not later than five days of the final working day of the trading month.
All the penalties are to be credited to the Investor Protection Fund.
The exchanges are to report the penalty collections to FMC by the 10th day of the following month. They are to examine implementation of these instructions during inspection of its members. If incorrect reporting on collections is found, the member is to be penalised up to 100 per cent of the shortage.
FMC has said interest-free deposits by members to an exchange would not be a part of the Settlement Guarantee Fund.
