In an effort to boost commodity trading in the country, the much-awaited amendments to the Forward Contract and Regulations Act of 1952 will happen during the Budget session of the Parliament.
And, in all likelihood, this will give the apex commodities regulator Forward Markets Commission (FMC) financial and functional autonomy.
FMC and leading commodity exchanges like the National Commodity and Derivatives Exchange are also looking at roping in the services of NGOs, micro finance institutions and banks to promote futures trading among small and marginal farmers.
Anupam Mishra, Director of FMC, told Commodity Online that the amendment of the Act would also help introduce options trading in the market. Besides, FMC will get the status of an autonomous regulator on the similar lines of SEBI, IRDA and TRAI.
In its efforts to help grow volumes, FMC has also proposed to restructure the shareholding pattern of exchanges, Mishra said.
The proposal along with the FCR amendment has been under the consideration of the Parliamentary Standing Committee and FMC expects that the government would come out with the new guidelines soon. This will help define the holding pattern of FIIs and the permit limit of FDI in the commodity market.
At present, no guidelines exist for the FII and FDI holding pattern in commodities market and exchanges. If proper guidelines are in place, it will give depth and liquidity to the market. However, in case of FIIs, SEBI also has to make certain amendments in its rules.
Figures with the FMC show the trading volumes on the commodity exchanges have been increasing steadily ever since the three exchanges - the National Commodity and Derivatives Exchange, Multi Commodity Exchange, and the National Multi-Commodity Exchange - were set up in 2003.
The trading value in commodities has gone up to Rs 27.4 lakh crore ($619.8 billion) between April-December 2006, from Rs 14.08 lakh crore in the same year-ago period, according to FMC data.
However, FMC officials fear that the government's move to ban futures trading in agri commodities to rein in inflation is likely to hit the commodity exchanges.
Banning the futures trading, economists have argued, is like shooting the messenger. Prices in the futures market, they say, are indicators of the shape of things to come and help the government plan its economy well in advance.
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