FMC bans Chennai-co for dabba trading

NEW DELHI: Futures trade regulator Forward Markets Commission has barred a Chennai-based entity from accessing the market for three years for indulging in dabba trading or trading outside the organised sphere.

The suspension of Chennai-based Altos Advisory Services for three years is the first such punitive action in the country for trading outside the regulated market, although it is commonplace in the US with an average 4-5 companies facing such actions every month for violating rules.

Altos Advisory Services was a member of MCX and NMCE. "The member was suspended because it was found to be indulging in futures trading outside the exchanges in various commodities," an FMC statement said.
When contacted FMC Chairman B C Khatua said the regulator has no power to levy penalty.

"We have taken action against illegal trading earlier but they were not to this magnitude. FMC for the first time has suspended a member for three years," Khatua said.

Though the suspension was made under section 12B of the Forward Contracts (Regulation) Act 1952, Khatua said, "The biggest handicap is that we don't have power to levy penalty".

In January, the government issued an Ordinance for amending the FC(R) Act, however, it could not get it passed by the Parliament within the prescribed time.

In the proposed amendment, the FMC was given independence like stock market regulator SEBI with powers like conducting raids and taking punitive actions against erring traders.

The Commodity Futures Trading Commission (CFTC), which regulates forward market in the US has taken action against 35 companies or individuals in the last six months for manipulation and violation of rules.