FMC exploring feasibility of common clearing corporation for commodity futures market

MUMBAI: India’s decade-old commodity futures market, comprising five national and 10 regional bourses, may get a common clearing corporation that will reduce transaction costs for participants.

Commodity market regulator Forward Markets Commission (FMC) has formed a working group to examine the feasibility of setting up a common clearing corporation, as well as common infrastructure facilities such as warehouses, assayers, elevators or aggregators to facilitate delivery of commodities for trade settlement through the clearing corporation. The group, among other things, will also examine whether goods in warehouses controlled by the corporation can be delivered across exchanges.

At present, warehouse stocks across exchanges are not fungible. The proposed fungibility will sharply reduce costs, and is a very positive step for the market, said Anil Mishra, managing director and chief executive of the National Multi-Commodity Exchange of India.

The working group has to submit a practical, actionable report by August 31. It is chaired by former central bank executive director VK Sharma and includes Ajay Shah, professor at the National Institute of Public Finance and Policy, and a representative each from the FMC and the Department of Economic Affairs, which supervises the regulator.