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Government to amend Forward Contracts Act to include futures definition

The Union Cabinet has agreed to amend the Forward Contracts (Regulation) Act, 1952, which includes providing for a definition of futures trading.

No such definition is available in the Act at present. (A futures contract is an agreement to buy or sell a specified quantity of a commodity, currency or shares at a particular price on a fixed date in the future.)

The Cabinet, while taking a decision, has been guided by the Kabra Committee for Amendment to Forward Contracts (Regulation) Act, 1952. It has also agreed to strengthen the Forward Markets Commission.

The amendments are: (i) definition of specific delivery contracts and non-transferable specific delivery contracts to make delivery of goods compulsory and to make performance of such contracts by any means other than delivery punishable; (ii) enhancement in the quantum of fine from Rs 1,000 to Rs 5,000; (iii) to recognise the dealings through brokers in addition to the members of the commodity exchange. For this, it is necessary to have a definition of ''broker'' and a substantive provision recognising only registered brokers as persons eligible to trade in commodity exchange in addition to the members of the exchange; (iv) increase the period of delivery of goods and payment under ready delivery contracts from the present 11 days to 30 days; (v) to remove prohibition on options in goods under Section 19 and provide for regulation of options; (vi) increase the maximum number of members of the FMC from four to seven.

UNI