The Forward Markets Commission is a statutory body set up under Forward Contracts (Regulation) Act, 1952 and functions under the administrative control of the Ministry of Consumer Affairs, Food and Public Distribution. The Commission regulates forward markets in commodities through the recognised associations, recommends to the Government the grant/withdrawal of recognition to the associations organising forward trading in commodities and makes recommendations for the general improvement of the functioning of forward markets in the country.
With the issue of the notification dated the 1 April 2003 the Government permitted futures trading in 54 more commodities. Hence, prohibition of futures trading in commodities stands completely withdrawn. Non-Transferable Specific Delivery (NTSD) contracts being genuine merchandising contracts were brought outside the review of regulation/prohibition by exempting NTSD contracts in 37 commodities from the operation of Section 17 read with Section 18(3) of the Act. Therefore all NTSD contracts are now outside the purview of prohibition and regulation of the Forward Contracts (Regulation) Act, 1952. Futures Trading in Bullion (gold and silver), Wheat and Rice has been commenced after a long gap. Futures trading facilities have been extended to Jammu and Kashmir.
To improve the functioning of the exchanges and also to adopt better trade practices in order to create confidence among potential participants, the Commission along with the various stakeholders has conducted massive awareness programmes.
The Government had set up an Inter-Ministerial Task Force on Convergence of Securities and Commodity Derivatives markets, which submitted its Report. In order to chalk out a road map for the Operationalisation of convergence, a Working Group has been constituted with representatives of all concerned Ministries and Organisations.
Three Nationwide Multi-Commodity Exchanges viz., National Multi- Commodity Exchange of India Ltd.(NMCE) , Ahmedabad, Multi-Commodity Exchange (MCX), Mumbai andNational Commodity and Derivatives Exchange (NCDEX), Mumbai were given permanent recognition to conduct trading in all permitted commodities.
The exchanges have been persuaded to implement various reforms such as online trading, time stamping, trade guarantee and settlement mechanism, one-third independent board representation, and back-office automation for their smooth functioning. In order to increase the volume of trading, the FMC is signing a memorandum of understanding with the Exchanges, setting benchmark targets.
The liberalisation and opening up of commodity market has started showing results in terms of a significant jump in the volume of futures trading in commodities. The exchanges have logged aggregate trade value of Rs 1, 30,214 crore during the financial year 2003-04 over Rs 68,276.04 crore during the financial year 2002-03.
