Forward Marketing Commission (FMC) to be merged in SEBI:
SEBI :
- Founded in 1988 as a non-statutory body for regulating the securities markets
- It became an autonomous body in 1992 with fully independent powers.
FMC :
- Founded in 1953
- But lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market.
- The commodities market is known to be more prone to speculative activities compared to better regulated stock market.
Why this merger happened?
NSEL scam. Subsequent regulatory and government interventions in this case eventually led to the governments announcing FMC’s merger with SEBI.
India’s Regulatory architecture has so far been fragmented with multiple oversight agencies sprouting after each reform announcement. Such fragmentation leads to turf battles.
Most countries, barring USA & Japan, has unified securities & commodity market regulator.
FMC functioned as subordinate to Ministry of Consumer Affairs without statutory powers. It was handicapped in terms of regulatory and manpower resources required to police this growing segment.
How Unification will be useful:
- Enhance the integrity of financial market
- Boost liquidity & Improve price discovery process
- Impact Spot commodity market – Transparency –> SEBI has credible record
Challenges in front of SEBI
- Jurisdictional powers of state government over agricultural marketing
- Political sensitivities involved with farm commodities
- Price volatility in commodities cannot be compared to that of stock/bonds