What is Forward Markets Commission (FMC) ?
The provisions of the Forward Contracts (Regulation) Act, 1952 manages the Commodity Futures Market. The provisions of the Forward Contracts (Regulation) Act, 1952 framed Forward Markets Commission (FMC) in 1953 which is supervising the authority made for checking the working of the Commodity Futures Market. The Ministry of Consumer controls its working.
The Commodity Market which is present in India is controlled by the Forward Market Commission. This Commission helps in storing the information about the trading conditions of the goods according to the provisions of the Act. The Commission also give suggestions to the Central Government for the recognition of associations. The basic aim is to get the price stability by the help of price discovery and risk management. These forward contracts are controlled by the F.C. (R) Act, 1952 by the Forward Markets Commission.
The headquarters of FMC is present in Mumbai and has the regional office in Kolkata. Before the NSEL crisis, Forward Markets Commission was controlled by the Ministry of Consumer. But now it is controlled by the Ministry of Finance, Department of Economic Affairs, Government of India and they check the functions of FMC under the administrative control.
Establishment and Constitution of the Forward Markets Commission
The basic rules and regulation of the Forward Markets Commission are as follows :
- A commission known as Forward Markets Commission is framed by Central Government by the notification of official Gazette. It was made for doing the work and executing the responsibilities as declared in the Commission or in the Act.
- The Commission will have minimum 2 members and maximum 4 members as appointed by the Central Government.
- The person which has direct or indirect financial interest or any other interest in the commission cannot be appointed or continue in the Commission and if any member has any interest than they should inform this to the Central Government according to the provisions of sub section.
- The member of the Commission can hold the office for only three years and the members can be reappointed after the end of the three years.
- All the other terms and conditions of the service for the members of the Commission will be in the manner as given in the Act.
Organisation / Structure of Forward Markets Commission (FMC)
Structure / role of forward markets commission explained as follows :
1) Market Regulation Division-I :
The various functions performed are as follows :
- Governance of National Exchanges (including Articles of Association, Regulations and Bye-laws).
- Capital adequacy, Settlement Mechanism and related matters.
- Initial Margin, Margin Collection/Margin Funding.
- Open Position Limit of Members and Clients, Daily Price Limits, Trade Timings and related matters.
- Net worth/Minimum Base Capital of Members.
- Settlement Guarantee Fund.
- Matters relating to promotion of hedging in the market.
- Warehousing.
- All policy matters relating to National Exchanges and those not covered under any division.
- Issues relating to Spot Exchanges.
2) Market Regulation Division-II :
The various functions performed are as follows :
- Governance of Regional Exchanges (including Articles of Association, Regulations and Bye-laws).
- Inspection and Audit of Exchanges.
- Inspection and Audit of Exchange Members.
- Inter-Ministerial fiscal and other policy issues including HLCC/FSDC/FSLRC.
- Parliamentary Committee and Parliament matters.
- International affairs including IOSCO, MOUs, Bilateral Agreements.
- New contracts, Contract designs, Trading permissions in Exchanges.
- Intermediary Registration.
- Issues of NOC to RBI, etc., and WOS.
3) Monitoring and Surveillance (M&S) Division :
Monitoring and Surveillance of trade at Exchanges.
4) Vigilance and Enforcement Division :
The various functions performed are as follows :
- Market Vigilance and Intelligence.
- Investigation and Enforcement.
5) Investor Protection Division :
The various functions performed are as follows :
- Investor Protection Fund (IPF).
- Complaints against Intermediaries.
- All Investor Protection Measures such as SMS, E-mail alerts, Contract Notes.
- Media campaign on Investor Awareness and all programmes conducted with IPF.
- Price Dissemination/Awareness/Training Programmes.
6) Research and Statistical Analysis Division :
The various functions performed are as follows :
- Market Research as well as Commodity Studies-Price analysis, conducting surveys, developing and maintaining base.
- Market Development, matter relating to new stakeholders including Aggregators.
- Annual Report, Bulletins and other literature on derivatives in Commodities.
- Monthly/Quarterly Reports/Monthly D.O., Letters.
7) Legal Affairs Division :
The various functions performed are as follows :
- Review legal and regulatory framework,
- Amendment to FC(R) Act/Rules. Framing of Rules and Regulations (in consultation with the concerned division).
- Vetting of Articles of Association, Regulations and Bye-laws of the Exchanges (to support Market Division).
- Judicial/legal proceedings.
- Legal opinion-interaction with the Law Ministry.
8) IT Division :
The various functions performed are as follows :
- Website Development and Management.
- IT matters.
9) Administrative Division :
The various functions performed are as follows :
- General Administration including HR, Recruitment, Training (Internal).
- Establishment.
- Meetings of Exchange CEOs.
- Deputation of Officers Abroad.
- Budget related matters.
- House Keeping and Estate Management.
- Purchases, Maintenance Contracts, Accounts.
- Record Keeping and Disposal
- Internal Vigilance.
- Library
- Official Language
Powers of Forward Markets Commission
The powers / role of FMC are as follows :
1) The Commission along with its duties also have some powers of civil court under the Code of Civil Procedure, 1908 while giving the suit according to the matters which are as follows :
- It can appoint the person in the Commission and can also check their working.
- It can make and inspect the document required.
- It can check the evidence on the affidavits.
- It can demand for any public record or copy thereof from any office.
- It also has the power on other prescribed matter of the Act.
2) The Commission can check the person those who gets any special allowance from the law to provide information on these matters according to the Commission as per the requirement. It should be in reference to the matters according to the consideration of the Commission and the person required so will be legally obliged for providing the information according to the meaning of Section 176 of the Indian Penal Code, 1860.
Functions of Forward Markets Commission (FMC)
The functions of FMC are as follows :
- It provides suggestions to the Central Government in reference to the recognition of or the removal of recognition from any association or in reference to the matter from the administration of the Act.
- It keeps the proper check on the forward market and also take corrective measures for using the power given to it by the Act.
- It can get the information of the trading conditions in reference to the goods which is. mentioned in the provision of the Act and also the information of the supply, demand and prices. It also presents the periodical report to the Central Government which shows the operation of the Act and the performance of the forward market in reference to the goods.
- It provides the various ways by which the performance of the organisation and forward market can be improved.
- It does the inspection of the accounts and other documents of any recognized association or registered association or wherever required the checking of the member of the association.
- It performs the other duties and exercise the powers as given by the Commission or under any Act or as given.