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G. Chandrashekhar

MUMBAI, March 22

IN order to promote futures trading in commodities mutual funds, financial institutions and foreign institutional investors should be allowed to operate in the commodity futures market, in the same manner they have been allowed to operate in futures trading offered by stock exchanges, the Bombay Commodity Exchange Limited (BCE) has demanded.

In a representation to the Union Finance Minister, the BCE (formerly, The Bombay Oilseeds and Oils Exchange) President, Mr P.M. Chheda, has sought that extant restrictions imposed by Reserve Bank of India as also the Securities and Exchange Board of India (SEBI) on entities such as MFs, FIs and FIIs should be removed. ``Mutual funds may float separate funds investment schemes with proper tax incentive, for investment and operation in commodity futures market'', he said.

Among several suggestions BCE has made to the Government is the modification of Rule 8 (1) (f) of Securities Contracts Regulation Rules, 1957 so as to allow stockbrokers — many are currently jobless — to become members of recognised commodity exchanges. At present, the rule prohibits stockbrokers to do any other business.

According to BCE, following its representation to Forward Markets Commission (commodity futures regulator) and SEBI, the latter has already recommended to the Finance Ministry for modification of the rule to allow brokers to enrol as members of commodity exchanges.

Another important suggestion that may have far-reaching impact on the future of commodity futures industry in the country relates to speculative losses. BCE has said income/loss arising out of futures trading should be allowed to be set-off against other business profit/loss.

For this purpose, section 43(5) of the Income-tax Act should be so modified that all contracts registered with Government recognised commodity exchanges shall be deemed to be not speculative transaction for the purpose of income tax. BCE said, the assessing authority could ask the exchange to authenticate the transactions.

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