To curb illegal trading in commodity market, the regulator FMC has asked exchanges to impose a penalty of Rs 100,000-500,000, with effect from April 1, on brokers carrying unauthorised trading activities.Besides introducing a penalty for illegal trading, the Forward Markets Commission has announced a uniform penalty structure for all the commodity exchanges, while raising the penalty amount for various other offences.

“Interest of market participants will be served better only if exchanges implement the uniform penalty structure in its true spirits,” a senior official with FMC told PTI.

“As there was no structured penalty for illegal trading, we have asked the commodity exchanges to levy a penalty of minimum of Rs 100,000 and a maximum of Rs 500,000 on their members (brokers) involved in unauthorised trading,” he added.

The penalty for illegal trading, which is also part of a common penalty structure, will be effective from April 1.

FMC has come out with the uniform penalty structure after it found during audits that national commodity exchanges were imposing different penalties for the same offence committed by the brokers.

It was also observed that for a few offences, exchanges were imposing very low penalty.

Currently for instance, MCX is levying Rs 10,000 per client as penalty on brokers (members) who are issuing more than one identity code to a client, while NCDEX and NMCE do not have any penalty in place for the same offence.

However from April 1, the exchanges have been asked to impose Rs 10,000 per client as penalty on members for issuing more than one identity code, the regulator said.

Similarly, the penalty on brokers, who are using one client’s fund for trading in another client’s account, has been kept uniform at Rs 25,000, against the current penalty range of Rs 10,000 to 50,000 by various bourses, it said.

The penalty for ‘non-maintenance of client code’ and ‘know your customers norms’ has been kept at Rs 10,000 per client, respectively, it added.

“The penalty provisions have been changed keeping in mind that penalties should be adequate to act as deterrent and should be uniform across exchanges so as to rule out the possibility of regulatory arbitrage,” the FMC official said.

At present, there are four national level and 19 regional level exchanges.

Source: PTI

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September 2021