In a bid to ring fence the six commodity futures market from an NSEL-like fraud, the Forward Markets Commission has directed all the exchanges to register their accredited warehouses with Warehouse Development and Regulator Authority and certificate of accreditation obtained from the authority by end of this year.
Henceforth, the Commission said, all the exchanges shall accredit only those new warehouses which are registered and accredited by the WDRA.
Exchanges have been told to send their comments for framing a separate regulation for warehouses by September 10.
The feedback should include the eligibility of warehouse service providers with special emphasis on the norms of capitalisation and financial adequacy, minimum infrastructure capacity which the service providers must comply with.
The exchanges should also inform about their existing mechanism for redressal of buyers’ grievances regarding quantity and quality of the goods delivered to them, said FMC.
The Commission has been discussing the subject with Exchanges, Warehousing Development and Regulatory Authority (WDRA) and other stakeholders in an endeavour to ensure that all the warehouses conform to certain minimum standard specifications.
It is also necessary that the warehouse service providers should be adequately capitalised to carry on the activity in compliance with all the conditions as may be prescribed from time-to-time, said FMC.
Warehouses play a critical role in settlement and trade in commodities market.
An efficient warehousing facility needs to ensure the integrity of the delivery mechanism by assuring the market participants of delivery of right quantity with quality of the commodities.
The issue of having an efficient warehousing system in all the commodity exchanges has been under serious consideration of the Commission, it said.
As per Forward Contract Regulation Act 1952, forward contracts in commodity markets entail that all the contracts must eventually result in delivery of the commodities.
Last month, National Spot Exchange, a group company of MCX, had halted trading on its platform and is now struggling to settle trade worth Rs 5,600 crore entered on the platform.
Most of the stocks that the exchange claimed to be in the warehouses have gone missing leading to investor uproar.