Lok Sabha Question No. 4240 (UNSTARRED), answered on 2017-08-11
Subject: Forward Markets Commission
Ministry: FINANCE
Asked by: HEMAMALINI, RAHUL RAMESH SHEWALE, SATYA PAL SINGH, SANJAY SHAMRAO DHOTRE

## GOVERNMENT OF  INDIA MINISTRY OF FINANCE

## DEPARTMENT OF  ECONOMIC AFFAIRS

## LOK SABHA UNSTARRED QUESTION NO.  4240

ANSWERED ON 1T** AUGUST,  2017

## FORWARD  MARKETS  COMMISSION

## 4240. SHRIMATI  HEMA MALINI:

SHRI RAHUL SHEWALE:

DR. SATYAPAL  SINGH:

SHRISANJAYDHOTRE:

Will the Minister  of  FINANCE be pleased  to state:

- (a) whether the  Government has  issued instructions to  the  commodities futures regulator Forward Markets  Commission  (FMC) to curb  speculation and price  manipulation of  farm items;
- (b) if  so, the details  thereof  and its impact  on prices  of  farm  items  so far;
- (c) the  number of complaints received by the  Govemment/FMC for  price manipulation of farm  items in  the  country during each of the  last  three years and  the  current year, State/UT-wise along  with  the action  taken^eing taken  by the  Govemment/FMC on such complaints so far;
- (d) the  existing mechanism to keep  a check  on speculation and  price  manipulation of  farm items;  and
- (e) the  other steps taken/being taken by  the  Government to  curb speculation and  price manipulation of  farm  items  and  to ensure balance between demand  and  supply  of such items  across  the country?

## ANSWER

MINISTER  OF STATE IN THE MINISTRY OF FINANCE

(SHRI ARJUN  RAM MEGHWAL)

(a) & (b): The Forward Markets  Commission (FMC) ceased  to exist  with  effect  from  September 28, 2015  consequent upon  merger  of  FMC with  Securities and Exchange Board  of  India (SEBI) in pursuant of  the provision of  the Finance  Act, 2015.

- (c) After  the  merger  of FMC with  SEBI,  number  of complaints in the  matter,  as received in SEBI from  different sources,  are as indicated below:

| Financial Year                |   No of complaints |
|-------------------------------|--------------------|
| 2015-16 (from September 2015) |                  9 |
| 2016-17                       |                 25 |
| 2017-18 (till July 2017)      |                  6 |

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Complaints are  examined and  admitted as  surveillance inputs. Price volatility and  trading activities are  monitored regularly and  actions such  as  imposition of special and/or additional margin have  been  imposed at different points of time. Further, surprise inspections of various warehouses across  the country  to check  the quality  of  deliverable agricultural commodities are also carried  out as and when felt necessary.

(d)  & (e):  Since  making  over  of  regulations of  commodity derivatives market  to SEBI  with  effect from  September 28, 2015, SEBI has taken  several  measures. It has prescribed specific norms  for strengthening of  the commodity derivatives market. Under  Integrated monitoring and surveillance, commodity derivatives markets  are kept under  watch  continuously to ensure  market  integrity.

Besides, in  order to  ensure smooth functioning of commodities derivatives markets, various regulatory measures are  exercised from  time  to  time  to  check  the  volatility in  the  commodity derivative contracts. In this regard,  the following measures have been taken:

1. Limit  on daily  price  movement to  prevent abrupt  upswing or downswing in prices  Daily Price  Limit (DPL) for all agricultural commodity derivative contracts have  been reduced  to 4  % from  earlier  limit  of  6 %  w.e.f.  February 14,2016.
2. Additional or/and Special margins payable on outstanding buy and  sell  positions besides initial,  Extreme Loss  Margin(ELM) and  Value  at Risk(VAR), to contain high  volatility in prices  have  been imposed on some  of  the  agri-commodity contracts such  as Ghana,  Sugar, Refined Oil,  Soyabean, RM seed,  Coriander, Cottonseed oil  cake,  Cotton  and  Mentha  oil etc.
3. Contracts in agri  commodities like  Ghana  was suspended from  trading starting from  July 27,2016  which  was subsequently re-launched starting  from  July  14,2017
4. Monthly/ periodical meetings with  the  National Commodity derivative Exchanges are conducted to oversee  trading  development and functioning of  the markets.

## Other  regulatory measures taken:

At the  instance of SEBI, the National Commodity Derivative Exchange have  introduced system providing real  time  alerts to  trading terminals for  the  clients trading through different trading members. Exchange trading system generates alert  when  any  of the  client exceed 70 %  of the prescribed open  position limits.  Besides,  it has  put in a  system  to restrict self-  trades  or wash trade.

SEBI conducts  surveillance on the futures  trading  in agri-commodities on near time  basis  and takes necessary corrective action  as and when  warranted to curb  manipulation.

4:  :f:  ^4c