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FMC to initiate book inspection of brokers
Mumbai: The commodity futures market regulator, Forward Markets Commission (FMC) has decided to initiate moves to regulate trading members of the exchanges. It has decided to invoke powers under Section 4 and 5 of the Forward Contract Regulation Act to launch methodical inspection of accounts of the members.

"We will inspect the books of members when required under these powers. While we may not need to inspect books of all members across the country, we will do so in case of leading members. We may send our own officials or we may even outsource the inspection," said S Sundareshan, chairman, FMC, on Friday, after a meeting with commodity bourses.

FMC has decided to set up a committee to look into the 'process of delivery' to enforce mandatory delivery of commodities for all open positions at the end of a contract. It has also decided to ask exchanges to drastically increase the penalty for delivery default by trading members and their clients from the current 0.5% of the trade value.

The Commission has also decided in-principle to allow exchanges to increase member position over a period of time. Currently there is hardly much difference between the member and client position, which is against the international practice.

He said that there were a lot of issues that needed to be sorted out to make delivery of physical goods mandatory. The issues of dematerialisation of warehouse receipts, the transferability of such demat receipts, the onus of condition of goods deposited with a warehouse need to be examined, he said.

The committee to be formed within a week will comprise representatives of the three national commexes MCX, National Multi Commodity Exchange (NMCE) and National Commodity & Derivatives Exchange (NCDEX) and about 2-3 representatives of leading single commodity exchanges.
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