FMC meets top brokers over spot exchange

A few top brokers are learnt to have met commodity exchange regulator FMC on Wednesday to provide feedback to the latter about certain contracts offered by spot exchange NSEL. Grapevine suggests that the regulator asked the brokers whether investors in such contracts were aware that these were unregulated and also about their utility.

The brokers apparently expressed the view that the contracts served a purpose and should be regulated by FMC, which currently only monitors spot exchanges like NSEL. However, they were unsure about whether the regulator was satisfied with the feedback, given recent media reports which suggested that the government was unhappy with the way these contracts were being run and about short sales being conducted in them, which is not permitted.

Repeated attempts to confirm the news with FMC chairman Ramesh Abhishek were unsuccessful. The contracts allow processors, millers, etc, to raise finance from buyers on the bourse against commodities stored in specified warehouses. At the end of a fixed period, say 30 days, the loan, along with interest working out to 12-15%, is paid to the buyer.