What is Forward Markets Commission (FMC) ?

Highlights:
  • The Forward Markets Commission (FMC) is the chief regulator of commodity futures markets in India.
  • It is a regulatory authority which is overseen by the Ministry of Finance, Govt. of India. 
  • It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act,1952. 
  • It is headquartered in Mumbai.
  • The Commission allows commodity trading in 22 exchanges in India, of which 6 are national.
  • FMC comes under the Ministry of Consumer Affairs, Food and Public Distribution because futures traded in India are traditionally in food commodities.
  • The Act provides that the Commission should consist of minimum two and maximum four members appointed by the Central Government. 
  • The chairman of the FMC is nominated by the central government.
  • At present five national exchanges, viz. Multi Commodity Exchange, National Commodity and Derivatives Exchange, National Multi Commodity Exchange, Indian Commodity Exchange Ltd and ACE Derivatives and Commodity Exchange, regulate forward trading in 113 commodities. 
  • Besides, there are 16 commodity specific exchanges recognised for regulating trade in various commodities approved by FMC under the Forward Contracts (Regulation) Act, 1952.

Commodities traded on these exchanges comprise:

  • Edible oilseeds: Groundnut, mustard seed, cotton seed, sunflower, rice bran oil, soy oil, etc.
  • Food grains: Wheat, gram, dals, bajra, maize etc.
  • Metals: Gold, silver, copper, zinc etc.
  • Spices: Turmeric, pepper, jeera etc.
  • Fibres: Cotton, jute, etc.
  • Others: Gur, rubber, natural gas, crude oil etc.

Functions of FMC:

  • To advise the central government in respect of the recognition or the withdrawal of recognition from any association.
  • To advise the central government in respect of issues arising out of the administration of the Forward Contracts (Regulation) Act 1952.
  • To keep forward markets under observation and to take such action in relation to them, as it may consider necessary, in exercise of the powers assigned to it under the Act.
  • To collect and whenever the Commission thinks it necessary, to publish information regarding the trading conditions in respect of goods to which any of the provisions of the Act is made applicable, including information regarding supply, demand and prices, and to submit to the central government, periodical reports on the working of forward markets relating to such goods.
  • To make recommendations to improve the organisation and working of forward markets;
  • To undertake the inspection of accounts and other documents of any recognised association, registered association or any member of such association whenever it considers it necessary.
  • As of July 2014, it regulated Rs 17 trillion worth of commodity trades in India.
  • In the wake of a Rs 5,500-crore payment crisis at the National Spot Exchange Ltd, FMC was brought under Finance Ministry in 2013. 
  • In the beginning, FMC was only regulating regional commodity exchanges and its role was expanded after the emergence of national electronic trading platform in early 2000.