Like every other business or market, Indian capital markets also come under the regulatory framework. In India, the capital markets are regulated by the Ministry of Finance, The Securities & Exchange Board India (SEBI), and the Reserve bank of India (RBI) etc. The Ministry of Finance is the regulator who regulate through the Department of Corporate Affairs – Capital Market Division and works for formulating policies in order to develop security markets as well as protect the interest of investors. On the other hand, RBI is responsible for implementing monetary policies, interest rate decisions, and managing foreign exchanges.
Speaking of exchanges the major stock exchanges NSE & BSE are regulated by none other the market regulator of India – Securities & Exchange Board of India (SEBI). Most investors are familiar with this but there are some misconceptions and confusions surround commodity market like who regulates the commodity market in India?
Or who is the regulator of commodity market in India?
There is confusion around the regulator of commodity market in India – Is it SEBI or FMC?
Who regulates Commodity Market in India?
Just as SEBI regulates the stock market in India, SEBI also regulates commodity derivative markets since September 28, 2015. Prior to that period, there was another regulatory body known as Forward Markets Commission (FMC) which overseen by the Ministry of Consumer Affairs regulated commodities.
It was a commodity futures market regulator of India before September 2015 which headquartered in Mumbai. FMC once recognized as a chief regulator of forward and futures markets in India who once regulated 17 trillion rupees of commodity trades in India. Forward Markets Commission (FMC) established in the year 1953 under the provisions of the Forward Contracts (Regulation) Act, 1952.
It was the Forward Market Commission (FMC) who was keeping forward markets under observation and advising the Central Government in matters from the administration of the Forward Contracts (Regulation) Act 1952. But, a couple of years back in 2015, after Jignesh Shah and Financial Technologies promoted National Spot Exchange Limited (NSEL) suspended trading of all its contracts, resulting in a payments crisis of over 5,600 crore rupees. As a result, the commodity market regulator was merged with the Securities and Exchange Board of India (SEBI).
Why SEBI is a Better Regulator than FCA?
Many investors and market participants couldn’t understand the terms of the merger. The thing is the regulation of commodities market which once stands on the Forward Contracts Regulation Act (FCRA) now shifted to the Securities and Exchange Board of India under the Securities Contracts Regulation Act (SCRA), 1956. SCRA is quite a powerful law which gives more power to SEBI than FCRA offered to FCA.
Besides, the Forward Market Commission only regulated the exchanges only, however, the SEBI regulates both exchanges and brokers of the commodity market in India. It has a much higher risk-monitoring mechanism, which strengthens the confidence of the investors. In fact, the SEBI has now the power to access call data records.
Now under SEBI monitoring, the commodities like cottonseed, soy oil, wheat, gram, gold, silver, copper, crude oil, and natural gas are traded on commodity exchanges in India under the regulations of Securities and Exchange Board of India (SEBI).
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