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Forward Markets Commission India
Central Government of India established Forward Markets Commission (FMC) in 1953. This Commission was setup under the provisions of the Forward Contracts (Regulation) Act of 1952. Usually this Commission comprises of two to four members to work independently. According to latest details, this Commission has currently allowed the commodity trading in 21 exchanges in India out of that 5 are represented by the nation itself.
This Commission was established by keeping in view the markets regulation for that it was brought into fore as chief regulator of the forwards for future Indian markets. By the year 2009 this Commission had already regulated the trade which was worth Rupees 52 trillion in country’s market context.
Ministries of Consumer Affairs and Food & Public Distribution (India) oversees the roles of FMC. The Commission functions from Mumbai which is considered as India’s financial capital. This Commission has been assigned many important roles which it plays as a key financial regulatory agency being established by the government.
Current Chairman of FMC is Mr. Ramesh Abhishek who was appointed for this post in 2011.
It might sound typical why FMC is not part of the Ministry of Finance rather than being overseen by the Ministries of Consumer Affairs & Food and Public Distribution. Researches done in other countries indicate that such commissions actually come under the Ministries of Finances. The factors related to Indian context are different and mainly based on the following:-
- In the Indian context food commodities are important for futures and trades
- An attempt had been made through a proposal to merge the commodities derivatives and securities regulation through inclusion of Forward Market Commission within SEBI or Securities and Exchange Board of India.
History & Contribution in Consumers Market
FMC has been playing crucial role in smoothening trades in the country for various types of commodities. The role of this Commission for the derivatives trading is considered pioneering one. It was in 1875 that first derivative market was incepted in Mumbai for the purpose of cotton futures trading. It remained an important aspect for the setting up of the FMC after the country’s independence.
The futures markets were established soon after it was observed minutely that there were ample scope for such markets to grow for food and consumer products especially the edible oilseeds, raw jute and related items.
The Defence of India Act, 1935 brought a change in the markets in India through that the government was permitted to certain restrictions besides having the direct control over food production. Mainly this law was for restriction or ban on trading or the derivatives especially meant to food stuffs. Food shortage problems were common after country’s independence especially in the 1950s. Keeping in view the appropriate measurement while the country struggled to feed its population it began restricting the food commodity trades.
Establishment of FMC during that period was not only a respite but a historic leap by the Indian government to bring things into right in order and to streamline the food related issue. With the establishment of this Commission, the derivative markets was turned more focused which resultantly benefitted to keep the cost and price instabilities under control.
Important Functions of FMC
FMC works as an advisory body and offer suggestions and guidelines to the Central Government for both recognition and recognition withdrawal if any and those related to the matters for administration of Forward Contracts (Regulation) Act 1952. Other important roles of this Commission are listed below:-
- Observe the activities of the forward markets with keen eye on their major and minor activities and use the powers given to it under the Act to bring everything right in order
- Collection and publication of data or information that relates to trading with all related factors applicable under its provisions to ensure the details about supply, demand and prices are monitored thoroughly
- FMC submits its reports on the market activities to the Central Government through periodic report submission to ensure thorough monitoring of activities in the forward markets associated to various items
- Regular recommendation for improvement of Indian markets structure
- Inspecting accounts and other documents of the associations working as key players in market in the capacity of an advisory body
FMC has important role to play as a regulatory body whose power to keep an observatory eye on the markets for better control over it makes this Commission an important one in India’s governance system. Mainly this Commission deals in the markets that trade for fibers and manufacturing, spices, edible oils, pulses and numerous energy products. Vegetables and metal futures are other trade options in which FMC works as a monitoring body.