Concerned over the falling trade volume after imposition of Commodity Transaction Tax (CTT), commodity markets regulator Forward Markets Commission (FMC) are considering several reforms to encourage investor participation on bourses adding that there is no plan on reversing tax. During July’13, CTT at 0.01 per cent was imposed on futures trading of non-agricultural items. After that, combined turnover in Indian 5 national and 12 regional level bourses fell by over 37 percent to Rs 85.28 lakh crore till January 15th of this fiscal.
Highlighting various reasons for low trading volume, FMC Chairman stated that participation could be improved without decreasing taxes as the regulator is taking several steps to enthuse more confidence in the market, bring more participation and better governance at the commodity exchanges. FMC planned to implement recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) by March’14 to strengthen consumer protection. Regulator is also working on rationalising position limits and initial margins for clients members, the corpus size of settlement guarantee fund, besides strengthening the warehousing facilities. In order to encourage retail investors, FMC emphasized that the exchanges are encouraged to launch small contracts and delivery-centre wise contracts among others. Furthermore, FMC is also planning to relax norms and permit brokerage firms, who hold equity up to 2 per cent in the exchange, to trade on the exchange platform. As per the present norms, brokerage firm who hold equity cannot trade on the exchange platform.
In other development, commodity markets regulator FMC stated that it will soon take a call on allowing investors to realise their funds in e-series contracts, under which retail investors bought and sold commodities in de-materialised form. E-series contracts, that were earlier offered on the crisis-hit NSEL, function like the cash segment in equities, but offered commodities in the demat form in smaller denominations.
Highlighting various reasons for low trading volume, FMC Chairman stated that participation could be improved without decreasing taxes as the regulator is taking several steps to enthuse more confidence in the market, bring more participation and better governance at the commodity exchanges. FMC planned to implement recommendations of the Financial Sector Legislative Reforms Commission (FSLRC) by March’14 to strengthen consumer protection. Regulator is also working on rationalising position limits and initial margins for clients members, the corpus size of settlement guarantee fund, besides strengthening the warehousing facilities. In order to encourage retail investors, FMC emphasized that the exchanges are encouraged to launch small contracts and delivery-centre wise contracts among others. Furthermore, FMC is also planning to relax norms and permit brokerage firms, who hold equity up to 2 per cent in the exchange, to trade on the exchange platform. As per the present norms, brokerage firm who hold equity cannot trade on the exchange platform.
In other development, commodity markets regulator FMC stated that it will soon take a call on allowing investors to realise their funds in e-series contracts, under which retail investors bought and sold commodities in de-materialised form. E-series contracts, that were earlier offered on the crisis-hit NSEL, function like the cash segment in equities, but offered commodities in the demat form in smaller denominations.
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