The Forward Markets Commission (FMC), the commodity market regulator, is considering fixing a minimum networth of Rs 100 crore for volume-starved regional commodity exchanges. The move will allow regional bourses to demutualise and go national.
Currently, there are three national and 19 regional commodity exchanges in India.
FMC is likely to finalise the norms for demutualisation and upgrade of regional exchanges in the next fortnight. The regulator may grant the regional exchanges a period of 3-5 years to raise their networth to Rs 100 crore. The minimum networth for national commodity exchanges, like MCX and NCDEX, is Rs 100 crore.
FMC is also considering norms for valuing the reserves and surpluses of commodity exchanges. It will also set norms for calculating a premium on bourses’ brand name, goodwill and the like, which can be considered for calculating the networth. The ownership structure of regional commodity exchanges will also be a part of the proposed norms.
Of the 19 regional exchanges, only four or five may be able to qualify and increase their networth.
Currently, the Ahmedabad Commodity Exchange is the only one that has finalised a partner for demutualisation and is waiting for FMC’s approval. FMC is expected to send the bourse’s proposal to the ministry of consumer affairs for the final approval.
“First, the exchanges have to decide what they would likely to be. A number of options would be granted for improving their risk management capabilities, proper demutualisation to begin with. If they want to upgrade themselves, the regulator would check their strength in several areas, including capital, warehousing and delivery before granting them permission to facilitate the national-level trading platform,” said FMC Chairman B C Khatua.
Under the new provisions, regional exchanges may be given an option to upgrade to an online system from the current outcry mechanism and employ trained manpower to carry out daily trade in commodities.
