Will the Sebi-FMC merger eliminate government interference in commodity trading?

After seven months of the announcement, finally today the commodity markets regulator Forward Markets Commission (FMC) was merged with the capital markets regulator, Securities Exchange Board of India (Sebi). It is the first time two regulators have got merged in India, but globally, barring the US and Japan, other major markets including the UK have one regulator for both securities and commodity markets.

It would perhaps have been better to give more teeth and autonomy to the FMC, but the government took the easy way out of a merger. However, now that the merger has happened, it will be good for the commodity market. Reason: Sebi being an independent body has the resources to bring in people and develop the infrastructure that is required to improve the functioning and expand the commodity markets.

Sebi Chairman U.K. Sinha in his speech today hinted at bringing in newer products including options as well as allowing existing stock exchanges to operate as commodity exchanges and vice-versa, which would be good for the overall ecosystem in the exchange space. But it won't be easy for Sebi as securities and commodities are different animals.

The concerning part is: will this merger be the first step towards the finance ministry trying to compromise on the autonomy of the financial regulator and keep control over them? Today's merger also brings into light the government's intention of creating a super regulator. 

Over the past few years, the finance ministry has being hinting at control and a bigger say over financial regulators. Already with the monetary panel, the government has taken a small step to regulate the Reserve Bank of India (RBI). The government trying to control the autonomy of financial regulators is not in India's best interest as foreign investors have loved India not only for it being a growth market, but also because the regulators saw to it that the markets never had a structural impact during the economic crisis.

Even looking at a commodity exchange, the question to be asked is, unlike the past where the government banned agri-commodity trading in the futures market, will today's merger stop government interference in the commodity exchange? Having said that, the government has given Sebi unbridled powers to rein in erring companies, powers of the kind that courts of law usually enjoy.

India doesn't need a super regulator but requires regulators with more freedom, autonomy and an environment to grow the ecosystem. Most important: to keep it simple and not complicate things.