The deadline to comply with rules for net worth, ownership, expires Thursday.
In a relief for national commodity exchanges, the Forward Markets Commission (FMC) is considering extending the deadline to comply with equity structuring and ownership guidelines by up to a year.
The deadline for over five-year-old commodity exchanges to comply with norms for net worth, ownership, equity restructuring, among others, on a par with the new ones, is expiring on Thursday.
The time limit for paring the shareholding of single stock exchange in a commodity exchange, however, is October-end. Sources said the national exchanges might be given an extension of three months to a year, depending on the levels of compliance.
The circular for extending the time limit is likely this week. The guidelines, for accrediting new national-level commodity exchanges and asking existing ones to comply with the norms, were set a year before.
All three national commodity exchanges – Multi Commodity Exchange (MCX), National Commodity & Derivatives Exchange (NCDEX) and National Multi Commodity Exchange (NMCE) – have to travel the extra mile to meet the guidelines. For example, MCX will have to bring down its parent Financial Technologies’ holding to 26 per cent from 31 per cent. “Other than this, we are fully compliant with FMC guidelines,” said MCX Managing Director Lamon Rutten. “The extension, which we had sought, will help us achieve the statutory requirement.”
With Crisil’s additional seven per cent stake sale to Shree Renuka Sugars cleared recently, NCDEX has also completed the stock restructuring formalities. But the exchange sought an extension to raise equity capital to the mandated Rs 50 crore from Rs 37.50 crore at present. Since equity capital was to be raised through a stake sale, some formalities were yet to completed, said an NCDEX official.
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NMCE, however, has to raise its equity to Rs 50 crore from Rs 16.67 crore at present. Besides, the Ahmedabad-based exchange is required to raise net worth to Rs 100 crore. “We require an extension to meet the two criteria,” said NMCE MD Anil Mishra.
Extension for foreign entities, too
The equity structure guidelines are part of the corporate governance norms for commodity exchanges to avoid conflict of interest among shareholders and to ensure diversified holding.
Meanwhile, the Department of Industrial Policy and Promotion, which monitors and stipulates norms for foreign shareholding in Indian entities, may also extend the deadline for foreign entities to realign their stakes in commodity exchanges. This will be done in consultation with FMC.
Under the stated guidelines, the shareholding of government companies, banks and public financial institutions, cooperative societies and federations manufacturing agri inputs and warehousing companies should not be less than 26 per cent. However, the total shareholding of government companies shall not be less than 10 per cent. No shareholder, except original promoters/investors, at the time of recognition as a national commodity exchange, either individually or together, shall hold more than 15 per cent of the paid-up equity. For original promoters/investors, this limit is 26 per cent.
Under these guidelines, further amended in 2010, the shareholding of any single stock exchange is capped at five per cent of the subscribed and paid-up equity capital of the said exchange. The cumulative shareholding of stock exchanges in the relevant national commodity exchange shall not be more than 10 per cent.