Rules are part of everyday human life, and we find them in schools, at work place, and in general society. Rules are like guidelines, and help people to understand what is acceptable and what is not. Without rules, the world would probably be chaotic. Similarly, our financial system is also regulated by independent regulators in the field of banking, insurance, capital market, commodities market and pension funds.
FMC stands for Forward Markets commission. Headquartered in Mumbai, FMC is a regulatory authority for commodity futures market in India. FMC is the chief regulator of forward and futures markets in India. FMC comes under the Ministry of consumer Affairs, Food and public distribution because futures traded in India are traditionally in food commodities.
FMC is a statutory body set up in 1953 under Forward Contracts (Regulation) Act 1952. The Act provides that the commission should consist of minimum two and maximum four members appointed by the central Government. The chairman of FMC is nominated by the central Government.
Unlike FOREX and Stock Markets; spot markets in commodities are not within the purview of Exchanges/ Regulators. State Governments regulate spot markets. Whereas futures markets are regulated by Forward markets commission which in turn is regulated by Ministry of consumer Affairs.
On 28 September 2015 the FMC was merged with the Securities and Exchange Board of India (SEBI), with the repeal of the Forward Contracts (Regulation) Act, 1952 (FCRA). Commodity exchanges will therefore now be regulated by SEBI, instead of by FMC. This merger was proposed by Finance minister Arun Jaitely in his Budget for 2015-16.
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 organization and working of forward markets.
- To undertake the inspection of accounts and other documents of any recognized association, registered association or any member of such association whenever it considers it necessary.