The Hindu Business Line : Turnover-based fee for commodity brokers likely

AFTER the stock brokers, it will be the commodity brokers who will have to pay a fee linked to their turnover to the market regulator for the development of the market.

The Forward Markets Commission (FMC), which regulates the commodity futures market, is working on a plan to levy a turnover-based fee on the commodity brokers who are members of the various commodity exchanges in the country.

This fee system will be on the same lines as the turnover fee introduced by the capital market regulator Securities and Exchange Board of India (SEBI) in 2001, but no decision has yet been taken on the percentage to be charged.

At present, the country has 25 commodity exchanges at various locations where commodity futures transactions take place. While the National Commodity and Derivatives Exchange (NCDEX) and the Multi-Commodity Exchange (MCX) are the largest two, there are23 specialised exchanges dealing with small commodity groups.

The daily total turnover of these exchanges is in the range of Rs 10,000-12,000 crore, which is around a quarter of the capital market.

When SEBI introduced the turnover-based fee, there was tremendous resistance initially from the broking community, following which the payment was staggered over a period of time. SEBI had introduced this fee when the Government asked it to arrange for its own resources.

Now, with commodity futures gaining popularity, the Government has asked the FMC to figure out ways for resource generation.

A member of the commission, Mr Rajeev Agarwal, told Business Line, "We need to raise resources. The funds will have to come from the members of the commodity exchanges and it would naturally be linked to the members' turnover."

"We need these funds to develop a proper surveillance system to guard against probable manipulations. We are yet to decide whether it would be a single tier surveillance like SEBI has or whether we would prefer to have a two-tier system," he said. SEBI monitors the capital market through the individual surveillance mechanism of the various exchanges and routinely inspects the books of the brokers. The FMC is toying with the idea of a separate mechanism linking the surveillance systems of the commodity exchanges.

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