Clients can claim money from commex fund if broker defaults

MUMBAI: Each investor in the commodity futures market can now claim a compensation of up to 2 lakh if a broker defaults in making payments to him/her. This money will be paid out of a commodity futures exchange's investor protection fund (IPF), which will be funded by the penalties levied and collected by an exchange from its brokers less administration costs, which has been capped at 10% of such penalties.

The corpus of IPF will also include one percent of transaction fees collected by bourses from each member or Rs 25 lakh, whichever is lower, in a financial year.

These are the crux of norms spelt out by the Forward Markets Commission ( FMC), regulator of the commodity futures market, for the creation of IPFs by the five national commodity exchanges -- Financial Technologies-promoted MCX, NSE-founded NCDEX, Ahemedabad-based NMCE, Kotak-promoted Ace and Reliance ADA-anchored ICEX.

The FMChas asked exchanges to set up trusts to administer the IPF, which, it said, must become operational by March 31, 2012.

The trust will comprise of two eminent persons, an independent director on the exchange board, an FMC nominee on the board and the bourse' s MD & CEO.