Sebi, FMC a merged entity

In the first ever merger of two regulators, the 60-year-old Forward Markets Commission (FMC) will merge on Monday with the younger but much bigger capital markets watchdog Sebi to create a unified regulatory body.

Department of Economic Affairs Secretary Shaktikanta Das, who was also present at the event, too evaded a direct answer on the timeframe and said Sebi is now the regulator for this market and all its recommendations would be considered by the government in due course.

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

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.

“Farmers, producers and consumers need to have confidence that derivatives market are free from manipulations and market abuses”.

A massive Rs 5,700-crore payment crisis at National Spot Exchange Limited (NSEL) was one of the key triggers for the merger of FMC with Sebi, although proposals in this regard have been in place for 12 years now.

“This merger indicates how the size of our markets have grown and how India has now become more aspirational”, Jaitley said at the function at the Trident hotel in downtown Mumbai. “All steps will be taken to develop the market”, he said. “We have to continue to change to evolve, to improve, to reform”, he said.

Commodities market has been hoping for FPIs to be allowed after FMC’s merger with SEBI, but the Reserve Bank of India (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.

“If derivatives in commodities resemble securities, then the developmental challenge of obtaining sound institutions for trading commodity derivatives can be eased by using the stable and mature institutions that are found in the securities markets”, said.

“The merger would bring convergence of regulations of the securities market and the commodity derivatives market”.