Department of Consumer Affairs

Ministry of Consumer Affairs, Food and Public Distribution

Government of India
GUIDELIE! F"# G#A$ "F #EC"GI$I" $" E%
A$I"AL C"MM"DI$& E'C(AGE UDE# $(E P#")I!I"!
"F $(E F"#%A#D C"$#AC$! *#EGULA$I"+ AC$, ,-./0
F0 o0 ,/1,1/2234I$ Dated ,50.0/226
Preamble
Forward trading in commodities is regulated under the provisions
of the Forward Contracts (Regulation) Act, 1952 (hereinafter referred
as FCR Act) !he Associations " companies organi#ing such trading are
re$uired to o%tain recognition from the &overnment of 'ndia under the
FCR Act At present, there are 22 recogni#ed Commodit( )*changes
including + ,ational -ulti Commodit( )*changes (,-C)s)
2 !he volumes of trades in the commodities derivative mar.et has
increased manifold after setting up of electronic )*changes with
/national0 status
+ &rant of recognition to new ,ational Commodit( )*changes was
done within the framewor. of 1ress ,ote issued on 2
th
-arch 2332
!hree ,ational )*changes came into e*istence in late 233+ through
this process !he Commodit( Futures -ar.ets have grown su%stantiall(
since then !here is a renewed interest in esta%lishing new ,ational
Commodit( )*changes !he $uestion of formulation of a framewor.
governing esta%lishment of ,ational Commodit( )*changes was under
consideration of &overnment for some time past Accordingl(, the
&overnment here%( la(s down the revised guidelines for ma.ing an
application for setting up of a nation4wide multi4commodit( )*change in
future, as under5
#evised Guidelines
6 A two stage process will %e followed for granting recognition to a
new )*change
First !ta7e
5 'n the first stage, applications for setting up of a ,ation4wide
-ulti Commodit( )*change ma( %e su%mitted %( reputed associations "
companies " organi#ations or consortium of such entities to the
&overnment through the Forward -ar.ets Commission (hereinafter
referred to as the Commission), the commodit( futures mar.et
regulator !he &overnment, on %eing satisfied that it would %e in the
interest of trade and also in the pu%lic interest to do so, ma( grant in4
principle approval for setting up of a ,ational -ulti Commodit(
)*change 'n4principle approval ma( %e granted to the applicant who
fulfills the following criteria5
51 !he proposed )*change, sponsored"promoted %(
Associations"companies"organi#ations or a consortium of such entities
should %e registered as a pu%lic limited compan( incorporated under
the Companies Act, 1957 with a minimum authori#ed e$uit( capital of
Rs 133 crore
52 !he proposed )*change shall have a demutualised structure, ie,
the share holders of the )*change shall not have an( trading interest
either as a trading mem%er or client at the )*change
5+ 8hile appl(ing for in4principle approval, the proposed e$uit(
9hareholding pattern of the )*change should %e as under :
a) ;ne or more of the initial partners"mem%ers of the
promoter consortium must %e a &overnment Compan("
Companies, as defined in the Companies Act 1957,
contri%uting at least 27 < of the paid up e$uit( capital of
the proposed )*change
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b) !he 9hare holding of institutional investors as defined
%elow shall not %e less than 23< with a minimum of 13<
from categor( (ii)
(i) 9toc. " Commodit( )*changes, =an.s and pu%lic
financial institutions>
(ii) &overnment Companies as defined in the Companies
Act, 1957, Co4operative 9ocieties as defined in the
9ocieties Act, Federations manufacturing or
mar.eting agri4inputs or mar.eting agri4produce or
owning and operating warehouses
c) ,o individual shall hold more than 1< of the paid up e$uit(
capital of the )*change and the total of such individual
holdings shall not e*ceed 25< of the paid up capital
d) 9u%?ect to the shareholding limits prescri%ed herein
%efore, no single shareholder either individuall( or
together with persons acting in concert with it shall %e
allowed to hold more than 63< of the paid up e$uit(
capital of the proposed )*change
e) 'nvestment in the initial paid up capital %( shareholders
shall %e su%?ect to a loc.4in period of three (ears from
the date of recognition of the )*change @owever, in
e*ceptional cases the period can %e rela*ed %( up to one
(ear %( the Forward -ar.ets Commission
f) (i) An( investor having shareholding in e*cess of 27< has
to %ring it down to 27< or %elow within two (ears
%eginning with the 6
th
(ear from the date of recognition of
the )*change
(ii) After the e*pir( of the period as specified at (i), it will
%e o%ligator( on the investors to align the shareholding
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pattern, as per the guidelines notified %( the &overnment
from time to time0
56 !he )*change shall ensure complete separation of ownership and
management 't shall have a 1rofessional management headed %( a
Chief )*ecutive ;fficer !he appointment, renewal and removal of the
C); shall %e done in the manner as prescri%ed %( the Commission
55 !he promoters of the proposed )*change shall su%mit a formal
agreement amongst themselves on issues related to the setting up of
the )*change and written commitment for e$uit( investment from
promoters" investors, including institutional investors !he formal
agreement shall, inter4alia, contain the e*tent of e$uit( investment
from each of the investors, e$uit( holding in the short and long term in
the authori#ed and paid up capital of the )*change, main place of
%usiness and registered office, etc
57 )ach of the promoters of the proposed )*change must %e a fit
and proper person !he criteria for /a fit and proper person0, shall %e as
at Anne8ure4I
90 !ubmission of proposal
6.1. !he detailed proposal should %e sent to the Chairman, Forward
-ar.ets Commission, &overnment of 'ndia, )verest, +rd Floor,
133, -arine Arive, -um%ai4 633 332, along with5
a) A non4refunda%le processing fee of Rs5,33,333"4 (Rupees Five
Ba.h onl() in the form of crossed demand draft issued %( an(
nationali#ed %an. in favour of Forward -ar.ets Commission,
pa(a%le at -um%ai Applications without the processing fee shall
not %e entertained %( F-C>
b) Aetails of the present %usiness of each of the promoters"
constituents>
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c) ,et worth of each of the promoters " constituents>
d) Audited accounts of each of the promoters " constituents for
the last + (ears>
e) =usiness plan for the proposed )*change and schedule for
operationalisation of the )*change from the date of in4principle
approval>
f) 1roposed capital e*penditure and sources of funds>
g) Clear confirmation of the location of the registered office and
main place of %usiness of the proposed )*change>
h) Affidavit %( the authori#ed signator( of each of the promoters
of the )*change affirming that the( don0t attract the
dis$ualifications listed at Anne8ure4I0
72 !he proposal should %e su%mitted in the form of a comprehensive
1ro?ect Report giving, inter4alia, ?ustification for setting up a new
e*change, details of the management structure, investment plan,
%usiness plan, s(stem of trading, clearing and settlement (including
settlement guarantee), customer protection, details of infrastructure
for handling ph(sical deliver( including the warehousing and assa(ing
arrangements along with the strateg( for implementation thereof
@owever, F-C ma( see. other details, as it ma( deem appropriate
C &overnment ma( grant in4principle approval after ta.ing into account
the recommendations of the Commission
2 An applicant granted in4principle approval shall %e re$uired to
su%mit to the F-C a %an. guarantee of Rs 53,33,333 (Rupees Fift(
Ba.h onl() issued %( a nationali#ed %an. with a validit( period of 21
months and a further claim period of + months and drawn in favour of
/Airector, Forward -ar.ets Commission, -um%ai0, within fifteen da(s of
grant of in4 principle approval for setting up the )*change
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!econd !ta7e
9 'n the second stage, the applicant who has %een granted in4
principle approval will have to compl( with the following conditions
within a period of one (ear from the date of grant of in4principle
approval !he )*change shall5
(i) %ring paid up capital of at least Rs 133 crore as per the
proposed e$uit( capital structure su%?ect to the
guidelines of para 52>
(ii) set up facilities for online trading with national reach
and an efficient real time monitoring and surveillance
s(stem>
(iii) provide for an efficient clearing and settlement s(stem
including esta%lishment of a 9ettlement &uarantee
Fund>
(iv) arrange for an efficient deliver( mechanism through an
ade$uate networ. of accredited warehouses>
(v) have an independent and professional management>
(vi) provide for ade$uate infrastructure for dissemination
of real time price and trade information>
(vii) provide for ade$uate infrastructure for research and
development on commodities, contracts and
development of trade>
(viii) su%mit draft rules, regulations and %(e4laws for
conduct of %usiness for in4principle approval of the
Commission>
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(ix) plan for a networ. of well organi#ed and capitali#ed
%ro.erage houses as mem%ers and other
intermediaries @owever, no mem%ership su%scription
or deposit of an( nature shall %e collected %efore grant
of recognition to the )*change ,o shareholder shall
%e allowed to %e a trading mem%er of the )*change
(x) 1rovide for efficient and effective grievance redressal
mechanism
131 'n case of failure to fulfill the a%ove laid down conditions within
the stipulated time, the &overnment reserves the right to revo.e the
in principle approval so granted without assigning further reasons
)*tension %e(ond the stipulated period ma( %e granted onl( in
e*ceptional cases on genuine grounds %ut not e*ceeding three months
132 'n the event of the applicant failing to esta%lish the )*change
within the stipulated period of time or e*tended period of time, as the
case ma( %e the %an. guarantee shall %e invo.ed and the amount shall
%e forfeited
11 !he &overnment, on satisfactor( fulfillment of the condition
stipulated and after ta.ing into account the recommendations of the
Commission in this regard, ma( grant recognition to the proposed
)*change
12 !he &overnment " F-C reserves the right to prescri%e an( other
condition if it deems fit for orderl( developments of the mar.et and
re?ect an application at an( stage without assigning an( reasons
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AE'U#E4I
Criterion for a person to be deemed to be :a fit and proper person;
For the purpose of these guidelines, a person shall %e deemed to %e a
fit and proper person if 4
(i) such person has a general reputation and record of fairness and
integrit(, including %ut not limited to :
(a) financial integrit(>
(%) good reputation and character> and
(c) honest(
(ii) such person has not incurred an( of the following dis4
$ualifications 4
(a) the person or an( of its whole time directors or managing
partners has %een convicted %( a Court for an( offence
involving moral turpitude or an( economic offence, or an(
offence against an( laws>
(b) an order for winding up has %een passed against the person>
(c) the person or an( of its whole time directors or managing
partners has %een declared insolvent and has not %een
discharged>
(d) an order, restraining, prohi%iting or de%arring the person, or
an( of its whole time directors or managing partners from
dealing in commodities D securities or from accessing the
mar.et has %een passed %( an( regulator( authorit( and a
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period of three (ears from the date of the e*pir( of the
period specified in the order has not elapsed>
(e) an( other order against the person or an( of its whole time
directors or managing partners which has a %earing on the
commodities mar.et, has %een passed %( an( regulator(
authorit( and a period of three (ears from the date of the
order has not elapsed>
(f) the person has %een found to %e of unsound mind %( a Court
of competent ?urisdiction and the finding is in force> and
(g) the person is financiall( not sound
(iii) 'f an( $uestion arises as to whether a person is a fit and proper
person, the decision of the Forward mar.ets Commission in this %ehalf
shall %e final
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