Dabba trading is the trading in commodity futures outside the Forward Market Commission (FMC) regulated exchanges. SEBI is the Regulator of Indian Shares/Equity Market,Like that Indian Commodity Markets are Regulated by Forward Markets Commission under Ministry Of agriculture,Government of India. FMC Regualted Exchanges are governed by the Forward Contracts Regulation Act (FCRA), 1952. Dabba trading or trading in commodity futures outside exchanges are not regulated by FMC. Dabba (off-exchange) trading is both risky and illegal.
Why Dabba Trading should be avoided
Dabba (off-exchange) trading is illegal and has the risk of losing my investment.Disputes arising in trades done on commodity futures exchanges can be redressed, including through arbitration,as provided by the exchange bylaws and regulations.A dispute in Dabba trading cannot be redressed by the commodity exchange.Trading outside an exchange is illegal and cannot provide legal remedies/redress my grievances.Dispute arising in Dabba trading can only be referred to police.
Dabba trading is also risky as it does not provide protection against counter party default risk as guaranteed by commodity futures exchanges for trades done on them.So Investor/Trader should choose right Broker registered with FMC Regulated Exchanges for Trading.verifying the broker's credentials also important before going to Trading. If broker can be default,money in Investor Trading Account can be refunded through Investor Protection Fund.In Dabba Trading getting redressal for complaints & Default of Dabba Trader approach to Investor Protection Fund cant be possible. So Dabba Trading has to avoided
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