| "We have yet not finalised on the baptism of the association which will be the subsidiary of MCX, but we are going to propose the title of this subsidiary as Rajkot Commodity Exchange (RCX) after letting it resolved in our board meeting and getting it registered with Registrar of Companies," Raju Pobaru, president, RSOBMA, said. | |
| Jignesh Shah, managing director, MCX, said, "This is for the first time ever that a regional association has become a subsidiary of MCX, paving the way for further consolidation if other associations, spread all over the country, also intend to be our part." | |
| He further said, "This is the right way, wherein regional commodity exchanges will co-exist with national commodity exchanges, offering a large bouquet of commodities which can be transacted nationally online." | |
| Explaining the necessity to go in for tie-ups with MCX, Pobaru said, "Forward Market Commission (FMC) was heavily pressuring our market to become online, but at this particular juncture we are not in a position to facilitate online trade. So, we decided to be subsidiary of an exchange which has an online transaction facility. Thus, our trade can benefit from its online transacting facility network, as this will not only increase the volume of trading and transactions taking place in our commodities but also help in registering growth in terms of revenue earned by entering such vibrant business platform." | |
| Pobaru further said, "At present, we have to pay Rs 25 lakh towards deposit, with additional Rs 25 lakh as bank guarantee, which is again in effect a deposit, and an entry fee of Rs 7.5 lakh. MCX, on its part, will facilitate us with the hardware and software support and list commodities transacted and traded in our exchange, which will go online. Currently, we follow shouting and out-crying trading pattern, in which on receipt of rates, buyers as well as sellers shout and out-cry in the same way to either buy or sell (mainly castor and edible groundnut oil is traded)." | |
| Initially, a network of 20 members from the association will be enrolled in this company who on payment of Rs 1.5 lakh will get membership of MCX directly and online connectivity, which would enable them to transact online commodities, for margin money limit of Rs 5 lakh. This will be their initial benefit. | |
| Of this 1.5 lakh, we are charging Rs 51,000 towards entrance fee and Rs 1 lakh as deposit, against which they will have access to this margin money limit, he added. | |
| These members will also be allowed to further pass connectivity to the membership base they wish to enroll under, and can allow to transact online commodities as listed on the MCX platform with suitable transacting limits as affordable to them, Pobaru said. | |
| Highlighting the benefits, the association will have on becoming a subsidiary of MCX in terms of revenue sharing, he said, "Currently, we are charging Rs 4 per transaction of Rs 1 lakh. But with this expansion in terms of facilities and infrastructure, we would now be charging Rs 6 per 1 lakh, and of this Rs 2 will be directly paid to the association or the subsidiary company, as usually there is turnover of 2,500 mt of castor transacted through our association. This would mean a good revenue to the subsidiary company." | |
| Moreover, MCX has a membership base of 1,100 people transacting commodities online across the nation. | |
| If anybody transacts commodities listed in the proposed subsidiary, MCX would pay royalty on the annual turnover value of the commodities transacted through the subsidiary. | |
| Since the physical delivery on transactions in commodities done via this subsidiary will be meager, vis-a-vis the trading and transacting patterns seen in futures, Pobaru said, "There is hardly 5 per cent work done physically in our trade, and 95 per cent work is chiefly in the trading and transacting pattern. We are banking highly on the revenues the subsidiary will earn as an amount of difference in pricing. Secondly, any transaction can be held for maximum 60 days and thereafter the difference money, along with 5 per cent penalty, is to be paid in case of transacting the same physically or carrying forward. So, here also we are expecting a tremendous flow of revenue." | |
| On the initial investment pattern, he said, "As we are collecting Rs 1.5 lakh from 20 members initially, Rs 30 lakh will come from members. The rest Rs 27 lakh and individual limit of Rs 5 lakh for 20 members will be invested from funds available with the association." | |
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