Jaitley announces FMC, SEBI merger to free market from manipulative practices

It was a packed gathering at the Trident, Nariman Point, at an event to mark the subsuming of the commodity markets regulator, the Forward Markets Commission, with its capital markets counterpart, the Securities and Exchange Board of India (Sebi).

Ramesh Abhishek, Chairman of FMC, UK Sinha, Chairman of SEBI, Srikant Das, secretary, department of economic affairs look on as Union Finance Minister, Arun Jaitley strikes a gong during an event announcing the FMC-SEBI merger in Mumbai on Monday.

Commodities market has been hoping for FPIs to be allowed after FMC’s merger with Sebi, but RBI recently told the markets regulator to keep any such decision on hold till a policy review is done by the government in this regard.

Jaitley said, “The merger will increase the economies of scope and scale as there are strong commonalities between all kinds of trading”.

The SEBI chief said that new participants like banks and FPIs (Foreign Portfolio Investors) as well as more products would be allowed.

The Finance Minister Shri Jaitley further said that the regulator must ensure that manipulative activities are curbed in this market.

He said that farmers, producers and consumers need to have confidence that derivatives market is free from manipulations and market abuses. “I am sure that Sebi would be successfully able to handle additional responsibility entrusted to it”, he said.

“These development measures will happen in few months”.

“As we go by, balance needs to be found between price stability and market development”.

“We will be very cautious so as to avoid making mistakes in commodities trading, focussing on how to improve movement of prices, strengthen human resources”, Sinha said.

Mr Jaitley said India has become more aspirational and it is no longer satisfied with a 6-8 per cent band of growth. “It also reflects how sectoral challenges have changed”. However, there is no legal bar for FIIs to invest in Indian commodity derivatives.

The merger on Monday is the result of the suggestions made in May 2003 by the Inter-Ministerial Task Force on Convergence of Securities and Commodity Derivatives Markets, chaired by bureaucrat Wajahat Habibullah.

Registration of brokers is in progress; it might take some months, says a leading broker.