While the much-hyped tug of war over Ulips between market regulator Sebi (Securities and Exchange Board of India) and insurance regulator Irda (Insurance Regulatory and Development Authority) has ended up at the Supreme Court, more tussles involving other regulators are coming to light. One such face-off was avoided recently after the NSE decided not to launch derivatives on gold exchange-traded funds (ETFs). The launch was postponed after the Forward Markets Commission (FMC), regulatory body for commodities trades, said that the regulation of such products was under its purview, not Sebi's. Earlier, the NSE had taken permission from Sebi to launch futures and options products with gold ETFs as the underlying asset.
The commodities regulator is also fighting a court battle with the Central Electricity Regulatory Commission (CERC) after the latter refused futures trading in power. The dispute started over a year ago, when CERC stayed the plans by the Multi Commodity Exchange (MCX) to introduce trading in power futures. The power regulator argued that the MCX would have to approach it, rather than the FMC, to launch the product. However, CERC is in no mood to allow the launch as it fears the speculators will distort the prices in a market that is facing short supply. FMC cited the Forward Contract (Regulation) Act of 1952, which gives it power to regulate all futures contracts.
Market observers believe that more regulatory disputes may be brewing and are likely to come out in the open soon. For instance, the original Insurance Act allows for pensions under insurance, which is regulated by Irda. However, the category has its own regulator, the Pension Fund Regulatory and Development Authority.
Similarly, the Competition Commission of India (CCI) can regulate competition issues across sectors. However, various sectors are subject to specific regulatory control and sector regulators, such as Sebi, RBI, Trai (Telecom Regulatory Authority of India) and Irda, have the mandate to regulate competition in their spheres. For instance, there is high tension between the RBI and CCI over the merger of banks. While the CCI seeks to control mergers across sectors, including banking, the RBI is unwilling to share its turf with CCI.
Turf wars
SEBI vs FMC
Issue: Commodities sector regulator FMC forced the NSE to postpone the launch of gold exchange-traded funds, despite Sebi having granted permission to the exchange.
FMC vs CERC
Issue: FMC has jurisdiction over all futures and options contracts. However, power sector regulator CERC has refused to allow futures trading in power.
