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Amendment to FC(R) Act needed to curb price manipulation

Written by: Staff
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New Delhi, Dec 4 (UNI) To refrain the increasing manipulation of prices of commodities by speculations there is a need of amending the Forward Contracts (Regulation) Act 1952, arming the Forward Market Commission (FMC) and commodity exchanges, an industry chamber said today.

The FMC and commodity exchanges would review their regulations to curb and eliminate manipulation of prices by speculators.

Securities and Exchange Board of India (SEBI) needs to be commended for farming the Prohibition of Fraudulent and Unfair Trade Practices Regulations, 1995, and take effective action under these regulations, the chamber added.

More than monetary and infrastructure investment today, growth is dependent on policy changes. Bill for a Forward Contracts Regulation Act will strengthen FMC's regulatory powers and promote the creation of a strong warehousing system for proper quality assurance is pending in Parliament, an Assocham statement on 'Regulatory Reforms Required in Indian Commodity Futures Market' opined.

The amendment will also provide for the setting up of a Forward Markets Appellate Tribunal on the lines of the Security Appellate, apart from addressing issues such as options trading, redefine commodities to include energy and weather and push forth demutalisation of regional exchanges, it said.

''What needs to be done is to tighten the margin system by deploying a variety of them like exposure margins, concentration margins, special margins on purchases in a rising market, special margins on sales in a falling market,'' said Assocham President Anil K Agarwal.

Also to be considered are limits on price fluctuations, restricting outstanding positions taking into consideration available stocks, taking drastic penal action against offenders, etc. While doing so, care has to be taken to ensure that the restrictions do not affect liquidity, Mr Agarwal added.

The statement indicated that even though price fluctuations are part of a market economy, allowing speculation without price risk management will make the market a casino with an overwhelming majority of speculators and hardly any real mechandising interest.

Futures markets are basically designed towards price discovery and hedging requirements of the actual users of the commodities.

UNI KR PV VV1713

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