Legal and Regulatory Framework

The Department of Consumer Affairs in the Ministry of Consumer Affairs, Food and Public Distribution -Government of India, is the apex regulatory body governing all commodity exchanges. Various powers to provide regulatory supervision, besides the powers to grant or withdraw recognition of any exchange rests with this Department of the Government of India. The Forward Markets Commission (FMC) was set up in 1953 to provide regulatory advice to the Government and have closer regulatory interaction with the commodity exchanges.  Most of the regulatory powers of the Central Government have been delegated to the FMC. For example, FMC has powers to approve the Memorandum and Articles of Associations as well as Byelaws of the Exchange.
It has also powers to conduct inspection of accounts of the exchanges/their members, inquire into the affairs of the exchange. In an emergency, it can even suspend trading. All contracts for futures trade have to be approved by the FMC before they can be launched on the exchange.
As a self-regulatory organization, NMCE also plays an important role by ensuring that the provisions in the Articles of Association, and Byelaws etc. are followed in letter and spirit. The regulation by the Exchange is rule-based and incorporated in the software itself.
Regulation involving human intervention and of discretionary nature is implemented through various committees of professional and experts. Special care is taken while constituting these committees to ensure that there is no conflict of interest.

Legal Hierarchy

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