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Forward Market Commission

  • FMC has been merged with SEBI in 2015

Merger of Forward Market Commission and SEBI

In the first ever merger of two regulators, commodities regulatory body Forward Markets Commission (FMC) merged with the capital markets watchdog SEBI.

This merger between the SEBI and the FMC was planned by the Congress Government and has its roots in the Union Budget 2014-15

The merger was precipitated with the National Spot Exchange Ltd. scam, which involved a payment crisis of more than Rs. 5000 crore. This was considered a regulatory failure by the FMC.

The merger was done to improve the market regulation in the country, in turn improving business environment.

The FMC has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment.

This is the first major case of two regulators being merged.

 

Revamped Role of SEBI:

The commodity futures market in India is now supervised by SEBI, making for an integrated regulation of both the securities and commodities markets in India.

SEBI was set up in 1988 as a non-statutory body for regulating the securities markets, while it became an autonomous body in 1992 with fully independent powers.

FMC, on the other hand, has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment.

This merger is a key test as the proposed merger of the insurance and pension regulators will hinge on the success of this.

What counts ultimately is the quality of regulation and the credibility and respect which a regulator draws from the market or those being policed. From that perspective, this will be a challenge for SEBI too.

This merger is not just a reversal of a trend but also a pointer to the way in which regulatory structures in India’s financial markets are set to change.

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