FMC asks commodity bourses to abolish sub-broker system

MUMBAI (Reuters) - Forward Markets Commission (FMC) has asked commodity bourses to discontinue with the sub-broker system, and allow their members to service their clients only though 'authorised persons'.

FMC, which regulates the Indian commodity futures market, has asked exchanges to comply with the directive within 60 days, a circular said on the commission's website. See (www.fmc.gov.in)

"This is a process of streamlining regulation of intermediaries in commodity futures market and protect client interests," said a senior official with FMC.

Under the present system, members of commodity bourses appoint sub-brokers to increase client penetration. In the new system, authorised persons will be appointed with permission of bourses.

"This is a slightly negative order as it reduces the incentives for getting more people to trade...reaching clients may become difficult," said a senior executive with a large Mumbai-based commodity brokerage.

The authorised person shall receive his remuneration from the member only and can't charge the clients for his services.

An FMC official, however, said the new system increases efficiency and transparency in commodity derivatives trade.

(Reporting by Sourav Mishra; Editing by Ramya Venugopal)

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