Government to allow FII and Mutual funds in commodity exchanges

New Delhi, July 31 (UNI) The Government today admitted in the Lok Sabha in a written reply in response to a question that Finance Ministry has been requested to initiate necessary action for allowing the Foreign Institutional Investors and Mutual funds in the commodity exchanges in the country.

Minister of State for Agriculture, Consumer Affairs and Public Distribution Akhilesh Prasad Singh said for this his Ministry has requested the Finance Ministry for amending Securities Exchage Board Of India (SEBI) Mutual Funds Regulations, 1995 and SEBI Foreign Institutional Investors Regulations 1995 in order to permit Mutual Funds and FIIs to participate in the commodity derivatives market.

He said it is expected that the participation of Mutual Funds and FIIs would bring global standards, greater liquidity in the market, breadth of participation and institutional discipline in the commodity derivatives market.

He said, so far no assessment has been made regarding the likely impact of participation of FIIs and Mutual Funds in the commodity futures market on the farming community.

The Government has not even studied whether there is any relationship between future trading and price rise and so far no specific study has been made to assess the relationship between futures trading and rise in prices.

He said the commodity future trading is regulated under the provisions of the Forward contracts (Regulation) Act, 1952. The forward Market Commission (FMC), is the Regulator established under the Act, is keeping a close watch on the functioning of the commodity exchanges. FMC has prescribed various regulatory measures such as imposition of margin, limit on open position, limit on daily price variation to ensure orderly functioning of the commodity futures market, he said.

Mr Singh also informed that there are twenty four recognised commodity futures exchanges, including three National Multi Commodity Exchanges in India. At present, twenty two exchanges are operational.

UNI/BKS AD RK1428