The Hindu Business Line : Turnover-based fee likely for commodity brokers

FIRST it was the turn of stockbrokers. Now, members of the commodity exchanges may be subjected to a turnover-based fee. The Forward Markets Commission (FMC), the regulator for commodity exchanges in the country, is toying with the idea of introducing a fee for commodity brokers, an official associated with the development said.

This means all commodity brokers (in futures trading) will have to register with FMCs, just as stockbrokers are registered with the Securities and Exchange Board of India. Besides the registration charges, a fee based on their turnover may also have to be paid by commodity brokers.

This move would also put an end to the speculations on the convergence of the two regulators — FMC and SEBI. On the other hand, FMC may be poised to become the more powerful regulator.

Under a Bill expected to be introduced in Parliament soon, FMC, currently an arm of the Consumer Affairs Ministry, is expected to get financial and administrative autonomy. Pending the legislation, the Ministry is examining ways to empower FMC to act as a self-financed regulator for commodity exchanges, the official said. Currently, the Government finances FMC through budget allocation to the Ministry.

At present, SEBI charges stock brokers a fee of 0.001 per cent of their daily turnover. FMC may not strictly follow the SEBI model; the Commission is understood to have worked out a revenue model and submitted it to the Ministry.

FMC will also have the power to impose penalties on defaulters. This will eliminate the practice of reporting of fake volumes in some commodities. Futures trading is allowed in almost all commodities.

Currently, there are over 2,000 commodity brokers in the country and a majority of them are members of the three nation-wide online commodity exchanges. But active traders number less than 1,000, said a commodity analyst.

The National Commodities and Derivative Exchange Ltd, the Multi Commodity Exchange of India Ltd and the Ahmedabad-based National Multi Commodity Exchange, the three major online exchanges, together have more than 1,000 members.

The average daily turnover in commodity futures is now put at over Rs 3,500 crore. A turnover fee would be an additional burden as commodity exchanges are already charging members a transaction fee, the analyst said. Charging a flat annual registration fee would be more advisable, he said.

The proposed fee is likely to be opposed by commodity brokers. In fact, stock-brokers also had initially opposed the turnover fee when it was initially introduced some years ago.

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