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Regulations soon to curb delivery defaults: FMC

Regulations soon to curb delivery defaults: FMC
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First Published: Sun, Sep 14 2008. 01 04 PM IST
Updated: Sun, Sep 14 2008. 01 04 PM IST
PTI
New Delhi: The commodity market regulator Forward Markets Commission will shortly come out with a provision to deal with the delivery defaults at the exchanges and is expected to be more stringent than imposing a monetary penanlty, a top official said.
“It’s still in the finalisation stage. Let me not comment on this. You will come to know on Monday or Tuesday,” Chairman of Forward Markets Commission (FMC) B C Khatua told PTI.
“He said the regulator is basically trying to facilitate delivery of goods to an extent possible to the buyers, who have paid money. FMC is still exploring many options,” he added.
Pointing out that the solution would be through a regulation, Khatua said: “I can’t surely say what solution we are going to come out with. I don’t want any solution which does not genuinely solve the problem of buyers.”
Since delivery of a number of farm commodities in the futures market have been made compulsory, the regulator has received complaints from traders and exporters that low- penalty provision is encouraging defaults.
Penalty charges
FMC in October last year, reduced the penalty charges for delivery defaults from 8% to 2.5% of the traded contract. While 0.5% goes to the affected party and the rest 2% to the Investor Protection Fund of the exchange.
Khatua said even when there was 8% penalty, still there were defaults. “And defaults have not risen significantly after the reduction,” he added.
“After all, when somebody is giving a delivery assurance, he is reasonably sure of having the goods and probably he intends to give delivery. In some circumstances, either beyond his control or very rarely due to constraints, he feels tempted not to give delivery. These occasions are very few,” he noted.
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First Published: Sun, Sep 14 2008. 01 04 PM IST