In the first ever merger of two regulators, over 60-year-old commodities regulatory body Forward Markets Commission (FMC) today merged with the capital markets watchdog SEBI with Finance Minister Arun Jaitley ringing the customary stock market bell to formalise the amalgamation.
The Securities and Exchange Board of India (SEBI) Chairman U K Sinha said that the commodities market entities would get a timeframe of up to one year to adjust to the new regulations as they would have to follow the same norms that are applicable to their peers in the equity segment.
“In order to ensure that nothing is disrupted, there is no discontinuity... We are giving some timeframe so that they can adjust with the new regulations,” Sinha said.
| 1 | This merger between the SEBI and the FMC was planned by the Congress Government and has its roots in the Union Budget 2014-15 |
| 2 | The merger was precipitated with the National Spot Exchange Ltd. scam, which involved a payment crisis of more than Rs. 5000 crore. This was considered a regulatory failure by the FMC. |
| 3 | Finance Minister Arun Jaitley says this merger would help improve the market regulation in the country, in turn improving business environment. |
| 4 | The FMC has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment. |
| 5 | This is the first major case of two regulators being merged. |
The SEBI chief also said that the entire process has “all been very well thought out” and the regulator has also brought out a handbook for the benefit of all entities by making them aware about various rules and regulations.
SEBI’s Whole-Time Member Rajeev Kumar Agarwal would oversee the commodities market regulation in the merged entity under the overall guidance of the SEBI Chairman.
At the event, Department of Economic Affairs Secretary Shaktikanta Das said, “Unleashing the process of reforms is a continuous process. We don’t wait for the Budget.”
SEBI was set up in 1988 as a non-statutory body for regulating the securities markets, while it became an autonomous body in 1992 with fully independent powers.
FMC, on the other hand, has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment.
The commodities market has been known to be more prone to speculative activities compared to the better-regulated stock market, while illegal activities like ‘dabba trading’ have also been more frequent in this segment.
Besides, the high-profile NSEL scam has rocked this market in the recent past and the subsequent regulatory and government interventions in this case eventually led to the government announcing FMC’s merger with SEBI.
The announcement for the merger was made by the Finance Minister in his Budget speech earlier this year and he rung the customary bell today to formalise the merger.
This is the first major case of two regulators being merged, as against the relatively more frequent practice worldwide of creating new regulatory authorities, including by carving out new bodies from the existing entities.
At present, there are three national and six regional bourses for commodity futures in the country.
Together, all the exchanges clocked a turnover of nearly Rs 60 lakh crore in 2014—15, from over Rs 101 lakh crore in the previous fiscal.
