FMC tightens settlement rules for commodity futures bourses

MUMBAI: Some lessons seem to have been learnt from the NSEL crisis.

Commodity futures regulator Forward Markets Commission (FMC), which was in the process of framing uniform guidelines for a settlement guarantee fund for national commodity bourses like MCX and NCDEX, has spelt out details regarding the fund sooner than expected.

Till now, there were no uniform rules on SGF or its components in the commodity futures market.

The FMC has now spelt these out in response to queries from the exchanges, which have been asked to implement them by August 31, 2013. Exchanges will have to deposit 5% of the gross revenue earned in a previous year from FY15 onwards (April 1, 2014).

As an initial contribution to SGF, exchanges will have to shell out a minimum of Rs 10 crore or 5% of the sum total of gross revenues earned by them in the five financial years through FY13, or from the date they became operational.

A new exchange like UCX, which was launched in April this year, will have to chip in Rs 10 crore.

SGF will also comprise base minimum capital from member brokers and the interest earned by the exchange on the BMC, refundable deposits made by members, excluding margins, settlement-related penalties charged from exchange from their members with effect from September 1, 2013.

Interest amount and any other income accrued on the investment of funds of SGF shall also be credited to the fund. However, FMC has said that margin collected by an exchange from its members to trade should not be part of SGF.

"Though a risk committee was to be set up to examine the details on SGF, the NSEL crisis seems to have hastened the process," said the CEO of a commex on condition of anonymity. The exchanges have been asked to constitute a committee for the management of SGF.