FIMMDA is a voluntary market body for the bond, money and derivatives markets, also described as Self Regulatory Organisation (SRO). It was incorporated as a Company under section 25 of the Companies Act,1956 on June 3rd, 1998. FIMMDA is an association of Commercial Banks, Financial Institutions and Primary Dealers. FIMMDA has members representing all major institutional segments of the market. The membership includes Nationalized Banks such as State Bank of India, its associate banks, Bank of India, Bank of Baroda; Private sector banks such as ICICI Bank, HDFC Bank, IDBI Bank; Foreign Banks such as Bank of America, ABN Amro, Citibank, Financial institutions such as ICICI, IDBI, UTI, EXIM Bank; and all Primary Dealers.
Mission
FIMMDA's represents Market Players and aids the development of the bond, money and derivatives markets. Dovetailed with this mission are specific objectives such as:
To function as the principal interface with the regulators on various issues that impact the functioning of these markets.
To undertake developmental activities, such as, introduction of benchmark rates and new derivatives instruments, etc.
To provide training and development support to dealers and support personnel at member institutions.
To adopt/develop international standard practices and a code of conduct in the above fields of activity.
To devise standardized best market practices.
To function as an arbitrator for disputes, if any, between member institutions.
To develop standardized sets of documentation.
To assume any other relevant role facilitating smooth and orderly functioning of the said markets.
FIMMDA seeks to achieve these objectives by establishing specific working groups. FIMMDA is represented in the Technical Advisory Committee (TAC) of the Reserve Bank of India on Government Securities and Money Market and also that on the Foreign Exchange Markets. The TAC provides FIMMDA an ideal platform to air market views to the central bank of the country. FIMMDA also conducts seminars, training programs and symposia to facilitate the achievement of its stated objectives.
FIMMDA as the premier debt association in the country addresses issues that affect the entire industry. Some of the work done in past pertains to issues like legal and accounting norms, documentation requirements and valuation methodologies.
Planned initiatives include providing training and certification to members, setting up a dispute resolution mechanism as well as creating new products and addressing the attendant details.
Highlighting the role of FIMMDA as an SRO, Shri Mohammad Tahir, Executive Director, Reserve Bank of India has stated as under:
The role of FIMMDA has become increasingly important in the development of the fixed income market in India. FIMMDA has played a pivotal role in the documentation of repos, CPs & CDs, finalizing the daily / annual valuation methodology for fixed income securities / derivatives. RBI has also consistently sought FIMMDA's views for repo Accounting, finalizing the scheme of trading of government securities on the Stock Exchanges and on a host of other issues. I particularly commend FIMMDA for the release of the "Handbook of Market practices ", which I think, will go a long way in standardizing market practices for the fixed income securities/ money market instruments / fixed income derivatives.
Further the Executive Director, RBI has pointed out the constructive role played by FIMMDA, as a self regulatory organisation as under:
Firstly, Self-regulatory bodies have the expertise and direct market contact needed to stay abreast of rapid changes in a complex industry. An SRO typically adopts, updates and enforces its own procedural rules and rules of conduct, using large network of market professionals, which contributes towards effective regulation. Indeed, SROs may offer considerable depth and expertise regarding market operations and practices, and may be able to respond more quickly and flexibly to the changing market conditions.
Second, the self-policing method of SROs increases motivation of market participants, who contribute to the development of industry best practices and standards. SROs help to develop a strong compliance culture in the institutions within their ambit.
Third, inclusion of industry professionals on an SRO's governing body and public participation in deliberations pertaining to regulatory policy and rulemaking, provide the foundation for an open transparent regulatory framework.
Fourth, historical experience shows that self-regulation allows for greater flexibility and diversity in methods of compliance with rules and regulations than may be possible for a statutory regulator to provide. Self-regulatory bodies have the ability to quickly modify their rules in response to changes taking place in the industry.
Fifthly, SROs ensure better information sharing among participants, which is of immense value, as it contributes to coordination of market oversight and reduces systemic risks. It is gratifying that FIMMDA has been fairly successful in discharging the above roles of an effective SRO.
