New Delhi, Nov. 4: The government has decided against merging the Forward Markets Commission (FMC) with the Securities and Exchange Board of India (Sebi). It is also considering a proposal to allow commercial banks, mutual funds and foreign institutional investors (FIIs) to trade in the commodities futures market.

It will make FMC an autonomous regulator for commodities futures trading by bringing in necessary amendments to the Forwards Contracts (Regulation) Act, 1952.

Sources said the issue of allowing banks, mutual funds and FIIs to trade in the commodities futures markets is under consideration of the government and the RBI. “This will increase liquidity and provide depth to the market,” sources said.

Sources said interests of farmers and commodities trading can be best served by a separate regulator focused on the market. “For this, FMC needs to be strengthened and made autonomous,” the source said.

The government has already finalised the draft of the Forward Contract (Regulation) Amendment Bill.

The draft amendment bill contains proposals to set up a Forward Markets Appellate Tribunal on the lines of the Security Appellate Tribunal (SAT) set up under the Sebi Act.

It will also pave the way for the creation of an options market for commodities. At present, option in goods is totally prohibited.

An inter-ministerial work group had recommended that FMC and Sebi should be merged with an independent new regulator for both the markets.

A subsequent study undertaken by the Financial Markets International (FMI) of the US by the department of food and consumer affairs and USAID, however, had highlighted the significant differences between the nature of the two markets.