The Hindu Business Line : FMC not averse to merger with SEBI

THE Forward Markets Commission (FMC) is not averse to a probable convergence with capital markets regulator, the Securities and Exchange Board of India (SEBI).

FMC sources told Business Line that the organisation was not averse to the idea of convergence provided it was allowed to perform its role in a more defined manner.

"We are in favour of any move that would mean upgradation or strengthening of our role as a regulator," a highly placed official said.

Conceding that the Commission had to operate in a Government set framework, which generally is slothful and slow, the sources emphasised the need to have an integrated market for equity and commodities.

The Government is considering shifting FMC from Consumer Affairs to Finance Ministry.

The latter is the administrative machinery for the money market (RBI) and for equity market (SEBI).

A unitary regulation from the policy perspective by transferring policy making for commodities market to Finance Ministry from Consumer Affairs Ministry, will complete the union of the three major markets i.e. money, equity and commodities.

To facilitate flow of funds between markets as and when Mutual Funds are allowed to participate in commodities markets, an integrated view of the markets is essential.

To a question as to whether a takeover/merger of FMC by SEBI was desirable, the FMC official was quick to point out that in reality it would not be a takeover/merger. It would mean convergence of two organisations into a super regulator.

There is a view in the market that this could mean both SEBI and FMC would lose their individual identities but come together to give a new face to the regulation of equity and commodities market. In other words, a common regulatory framework with a specific and independent responsibility to oversee commodities and equity markets.

Currently, SEBI does not have the expertise in regulating commodities.

There is also a marked difference in the way players and companies in the equity market perceive SEBI's role as regulator and players and traders in the commodity markets view FMC.

Keenly aware that the commodities futures industry on the whole does not look upon favourably on such a scenario taking place, the sources said there was a misconception that such a marriage would not be made in heaven.

"If they are given a mandate to promote commodities market how can you think that they will kill that market. For the growth of the market, a regulator has to be strong and fully empowered. However there are those who are happy with the current status quo. There is no denying that today we need to play a more proactive role, come up with new ideas, interact laterally," sources said.