(1) Futures trading in commodities are
regulated
under the Forward Contracts (Regulation) Act, 1952. Commodity
Exchanges, like Stock Exchanges, are infrastructure companies in the
commodity futures market. With a view to infuse globally acceptable
best practices, modern management skills and latest technology, it
was decided to allow foreign investment in Commodity Exchanges.
(2) For the purposes of this chapter/article,
(i) Commodity Exchange is a recognised
association
under the provisions of the Forward Contracts (Regulation) Act, 1952,
as amended from time to time, to provide exchange platform for
trading in forward contracts in commodities.
(ii) Recognised association means an association to which recognition for the time being has been granted by the Central Government under Section 6 of the Forward Contracts (Regulation) Act, 1952
(iii) Association means any body of individuals, whether incorporated or not, constituted for the purposes of regulating and controlling the business of the sale or purchase of any goods and commodity derivative.
(iv) Forward contract means a contract
for the
delivery of goods and which is not a ready delivery contract.
(v) Commodity derivative means-
(a) A contract for delivery of goods, which is not a ready delivery contract; or
(b) A contract for differences which
derives its
value from prices or indices of prices of such underlying goods or
activities, services, rights, interests and events, as may be
notified in consultation with the Forward Markets Commission by the
Central Government, but does not include securities.
FDI in commodity exchanges is allowed
up to 49% (FDI
& FII) [Investment by Registered FII under Portfolio Investment
Scheme (PIS) will be limited to 23% and Investment under FDI Scheme
limited to 26% ] through government approval route (FDI).
(i) FII purchases shall be restricted to secondary market only and
(ii) No non-resident investor/ entity,
including
persons acting in concert, will hold more than 5% of the equity in
these companies.
