Forward Markets Commission

11.1.Introduction

The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The Forward Markets Commission (FMC) is the chief regulator of forwards and futures markets in India. As of March 2009, it regulated Rs. 52 trillion worth of commodity trades in India. It is headquartered in Mumbai and this financial regulatory agency is overseen by the Ministry of Finance.

Forward Markets. Commission (FMC) is a statutory institution set up iI’ 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India

11.2.  Functions/Responsibilities  of  FMC

The functions 0f the Forward Markets Commission are as follows:

1. To advise the Central Government in respect of the recognition or the withdrawal of recognition from any association or in respect of any other matter arising out of the administration of the Forward Contracts (Regulation) Act, 1952
2. To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it by or under the Act.
3. To collect and whenever the Commission thinks it necessary, to publish information regarding the trading conditions in respect of goods to which any of the provisions of the Act is made applicable, including information regarding supply, demand and prices, and to submit to the Central Government, periodical reports on the working of forward markets relating to such goods.
4. To make recommendations generally with a view to improving the organization and working of forward markets;
5. To undertake the inspection of the accounts and other documents of any recognized association or registered association or any member of such association whenever it considers it necessary.

11.3.  Membership

How to become a Member of Commodity Exchange?

To become member of Commodity Exchange the person should comply with the following Eligibility Criteria:

1. He should be Citizen of India.
2. He should have completed 21 years of his age.
3. He should be Graduate or having equivalent qualification. He should not be bankrupt.
4. He has not been debarred from trading in Commodities by statutory/regulatory authority.

There are following three types of Memberships. of Commodity Exchanges:

Trading-cum-Clearing Member (TCM) A TCM is entitled to trade On his own account as well as on account of his clients, and clear and settle trades himself. A sole proprietor, Partnership firm, a Joint Hindu Undivided Family (HUF), a corporate entity, a cooperative society, a Public sector organization or any other Government or non-Government entity can become a TCM.

There are two types of TCM viz., TCM~1 and ‘I‘CM-2

TCM-l refers to transferable non-deposit based membership and TCM-2 refers to nontransferable deposit based membership. A person desired to register as TCM is required to submit an application as per the format prescribed under the business; rules, along with all enclosures, fee and other documents specified therein. He is required to go through interview by Membership Admission Committee and committee is also empowered to frame rules or criteria relating to selection or rejection of a member

Institutional Trading-cum-clearing Member (ITCM)

Only an Institution! Corporate can be admitted by the Exchange as a member, conferring upon them the right to trade and‘ clear through the clearing house of exchange as an Institutional Trading-cum-clearing Member (ITCM). The member may be allowed to make deals for himself as well as on behalf of his clients and clear and settle such deals. ITCMs can also appoint sub-brokers, authorized persons and Trading Members who would be registered as trading members

Professional Clearing Member (PCM)

A PCM entitled to clear and settle trades executed by other members of the exchange. A corporate entity and an institution only can apply for PCM. The member would be allowed to clear and settle trades of such members of the Exchange who choose to clear and settle their trades through such PCM