Weak comexes may be stripped of licences

Forward Markets Commission (FMC) may not renew licences of non-performing or underperforming commodity exchanges if they fail to attract business for a long term.

"We will have to look into the past performances of exchanges while renewing their licences," said FMC Director Anupam Mishra.

"The licences granted for different periods are about to expire, so the exchanges will have to renew them on the respective date. We will look into all financial aspects, including business generated for a long period, before renewing their licences," he added.

Most regional exchanges were granted licences for periods ranging between three years and five years. They were also given permanent membership after the Forward Contract Regulation Act bill had been passed.

Besides the three national commodity exchanges "" Multi Commodity Exchange, National Commodity & Derivatives Exchange and National Multi Commodity Exchange, the regional bourses, which were granted permanent recognition, included East India Cotton Association (EICA), Bombay Commodity Exchange, Indian Pepper & Spice Trade Association, East India Jute & Hessian Exchange and Ahmedabad Commodity Exchange.

At present, four of the 21 regional exchanges are running out of business owing to a huge volume shift from scattered small locations to national bourses. The four depressed exchanges are the Bullion Association, the East India Cotton Association, East India Jute & Hessian Exchange, and e-Commodities.

In fact, e-Commodities never took off. The Delhi-based online exchange, licensed five years ago to trade in commodities, primarily sugar, has been put on sale for which, according to sources, EID Parry has evinced interest.

"There are two ways of dealing with the situation "" either withdraw the licence or wait for a longer time. We have preferred to wait till the present recognition expires," Mishra said.

FMC is evaluating all possible options to bring these sick exchanges on track by providing technical and other assistance before taking a final call on withdrawing or renewing licences for the next tenure.

Executives of all these weak exchanges, too, are working overtime to attract some business interests from active traders.

The Bullion Association is looking for an upgrade from 'outcry' to 'online'.

"We obtained licence from the government to launch 'outcry' trade in 2004, and made some members thereon. But owing to flourishing online trade opentry could not work, so members were refunded the exchange fee. They are happy trading in national exchanges," said Mahendra Ajmera, Bullion Association chief.

"We have applied to FMC for the permission of online trade, and our software provider is working on the total expenditure. We will take a decision very soon," he added.

EICA is also finding no trader despite several months of launch of futures of ICC-21 (Shankar-6), ICC-22 (V797) and ICC of 26 mm fine grade.