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FMC-SEBI Merger
Oct 06, 2015

The commodities regulator Forward Markets Commission (FMC) formally merged with the securities market regulator SEBI recently. The ultimate objective of merging the commodities regulator FMC with the securities market regulator SEBI was to reap the economies of scale and scope of markets which were borderless, global and integrated with each other. This was because derivatives on equities and commodities were similar in nature and used for hedging and price discovery.

  • This is the first major case of two regulators being merged, as against the relatively more frequent practice worldwide of creating new regulatory authorities, including by carving out new bodies from the existing entities.

  • At present, there are three national and six regional bourses for commodity futures in the country.

  • SEBI was set up in 1988 as a non-statutory body for regulating the securities markets, while it became an autonomous body in 1992 with fully independent powers.

  • FMC, on the other hand, has been regulating commodities markets since 1953, but lack of powers has led to wild fluctuations and alleged irregularities remaining untamed in this market segment.

  • The commodities market has been known to be more prone to speculative activities compared to the better-regulated stock market, while illegal activities like ‘dabba trading’ have also been more frequent in this segment.

The finance minister had announced in his budget the decision to merge the commodities market regulator, Forward Markets  Commission (FMC), with the capital markets regulator, Securities and Exchange Board of India (SEBI).

Main Objectives of SEBI

  • To regulate the activities of stock exchange.

  • To protect the rights of investors and ensuring safety to their investment.

  • To prevent fraudulent and malpractices by having balance between self-regulation of business and its statutory regulations.

  • To regulate and develop a code of conduct for intermediaries such as brokers, underwriters, etc.


1. Regulation of Stock Exchanges: The first objective of SEBI is to regulate stock exchanges so that efficient services may be provided to all the parties operating there.

2. Protection to the Investors: The capital market is meaningless in the absence of the investors. Therefore, it is important to protect the interests of the investors. The protection of the interests of the investors means protecting them from the wrong information given by the companies in their prospectus, reducing the risk of delivery and payment, etc. Hence, the foremost objective of the SEBI is to provide security to the investors.

3. Checking the Insider Trading: Insider trading means the buying and selling of securities by those people’s directors Promoters, etc. who have some secret information about the company and who wish to take advantage of this secret information. This hurts the interests of the general investors. It was very essential to check this tendency. Many steps have been taken to check inside trading through the medium of the SEBI.

4. Control over Brokers: It is important to keep an eye on the activities of the brokers and other middlemen in order to control the capital market. To have a control over them, it was necessary to establish the SEBI.


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