UPSC Prelims 2010 Q135: Indian Economy – Financial Markets & Capital Markets
In India,
which of the following is regulated by the Forward Markets Commission ?
- (a) Currency Futures Trading
- (b) Commodities Futures Trading
- (c) Equity Futures Trading
- (d) Both Commodities Futures and Financial Futures Trading
Answer: (b) Commodities Futures Trading
Explanation
What the Forward Markets Commission regulates
The Forward Markets Commission (FMC) was India's regulatory body for a specific category of derivative trading.
| Option | Verdict | Reason |
|---|---|---|
| (a) Currency Futures Trading | Incorrect | Currency futures fall under the regulatory purview of the RBI/SEBI, not the FMC |
| (b) Commodities Futures Trading | Correct | The FMC was specifically established to regulate commodity futures/forward markets in India |
| (c) Equity Futures Trading | Incorrect | Equity derivatives are regulated by SEBI, not the FMC |
| (d) Both Commodities Futures and Financial Futures Trading | Incorrect | The FMC's mandate was specifically commodities, not financial futures broadly |
Forward Markets Commission facts:
| Point | Detail |
|---|---|
| Regulates | Commodity futures/forward markets |
| Later development | Merged with SEBI in 2015 |
| Not regulated by FMC | Currency, equity, or broader financial futures |
Answer: (b) Commodities Futures Trading.
Why each option is right or wrong
- (a) Incorrect. Currency futures fall under RBI/SEBI regulation, not the FMC.
- (b) CORRECT. The FMC specifically regulated commodity futures trading in India.
- (c) Incorrect. Equity futures are regulated by SEBI, not the FMC.
- (d) Incorrect. The FMC's mandate was specifically commodities, not financial futures broadly.
Key point
The Forward Markets Commission (FMC) specifically regulated COMMODITY FUTURES TRADING in India — not currency, equity, or broader financial futures.
Remember
Forward Markets Commission: regulated commodity futures trading in India (later merged with SEBI in 2015).
Common mistakes
- Confusing the FMC's commodity-specific mandate with broader financial market regulation (handled by SEBI/RBI).
- Assuming a 'futures market regulator' automatically covers all futures categories.
- Not knowing the FMC's later merger with SEBI in 2015.
Exam tip
FMC = commodity futures regulator (merged into SEBI in 2015). Currency and equity futures were always under RBI/SEBI, not the FMC.
Sources
- Forward Contracts (Regulation) Act, 1952
- Forward Markets Commission — Annual Report 2009–10