India's second largest commodity bourse NCDEX has approached Forward Markets Commission, urging the commodity market regulator to reconsider its decision to quash the exchange's proposal for lowering the transaction fee.
"We have made detailed submissions to FMC with a request to reconsider its decision in its order dated February 19, 2009," NCDEX Managing Director and CEO R Ramaseshan said in a circular issued today.
"We hope that the submissions would be considered objectively, in the larger public interest," he added.
On February 5, the Bombay High Court had dismissed a petition filed by the NCDEX over slashing of transaction rates. The Court had asked FMC to decide on NCDEX's application within two weeks.
Later, FMC passed an order quashing the NCDEX circular on grounds that the exchange has not given a satisfactory explanation on how the reduction in transaction fee would not affect the commodity market.
It may be noted that in January NCDEX had reduced the transaction fee to boost its falling turnover. It had announced uniform charges of Rs 3 for every lakh of the total value of all trades in all commodities from 10 am to 5 pm and five paise in the second session from 5 pm to 11 pm.
The rates in the second slab were reduced drastically, in an attempt to attract trade in the metals.
In the circular issued today, NCDEX argued that it had reduced transaction charges as a competitive strategy, which was formulated to get volumes in non-agricultural commodities.
"We do not believe that there will be any inimical effect on the trade or industry, as has been made out. It is unfortunate that the exchange has been stopped from making a move to reduce transaction fee as part of its competitive strategy, which would have benefited market participants, in general," Ramaseshan said.
Besides requesting to reconsider the new transaction charges, NCDEX has also pointed out that "there have been some incorrect observations in the order of the FMC which has a bearing on the image of the exchange".
NCDEX clarified in the circular that it had not violated any FMC guidelines while issuing the new transaction fee saying that "there is no directive that exchanges should seek the prior permission or give prior intimation to FMC while prescribing transaction charges".
On unauthorized deviations and diversion of funds, the regulator said, "The exchange unequivocally affirms that the funds belonging to the members are fully invested and are safe and secure and not used by the exchange for its operational purposes".
It also said that the entire members' money which is not part of Settlement Guarantee Fund (SGF), has been 'invested safely' and 'not used by the exchange for its operation'.
