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Wednesday, Jul 17, 2002

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Multi-commodity bourse — FMC to forward names this week

M.R. Subramani

CHENNAI, July 16

THE Forward Markets Commission (FMC) is likely to recommend "more than one" name to the Department of Consumer Affairs in the Food Ministry for setting up multi-commodity exchanges in the country.

"We will send our recommendations to the Department of Consumer Affairs this week. We may recommend more than one party for setting up the multi-commodity exchange," the FMC Chairman, Mr Anand Kumar Bhatt, told Business Line.

The FMC's recommendation will be based on the presentations made by the 16 applicants who had bid for setting up of the bourse. A "slight delay" in sending the recommendations was due to an applicant seeking time to make the presentation. "They sought time since trains on their section were cancelled due to rains," Mr Bhatt said.

The Department of Consumer Affairs is expected to give its approval to the FMC recommendation in two to three weeks after it is sent.

"After the Government gives its approval, the parties concerned will take about 10 months to set up the exchange," he said. Online trading is mandatory for the multi-commodity exchange since it is expected to reach a wider section of trade.

The Government's objective of setting up a multi-commodity exchange is to ensure wider participation by the public in view of some of the single commodity exchanges witnessing a poor turnover and participation.

The Government had cleared the setting up of multi-commodity exchange by a consortium that included Mahindra and Mahindra, National Stock Exchange, Punjab Warehouse Corporation and ICICI. However, the proposal was dropped as the consortium members could not arrive at a consensus on setting up the bourse's headquarters. The Punjab Government wanted the headquarters at Mohali, while the others in Mumbai.

The National Stock Exchange is in the running for setting up the multi-commodity bourse this time too. This apart, the Bombay Commodity Exchange (BCE) is also in fray through a consortium including the Bombay Stock Exchange, SSI Ltd and Agricultural and Processed Food Products' Export Development Authority (Apeda). The Ahmedabad Stock Exchange and Hyderabad Stock Exchange are among other contenders.

To a question on International Commodity Exchange, which runs pepper futures, deciding not to go online, Mr Bhatt said: "It is not mandatory for single commodity exchanges to go online. When we have not forced other single commodity exchanges, we cannot force them also."

However, the proposed futures on sugar and tea had been allowed on the condition that they trade online, he said.

"We are not forcing but only persuading all exchanges to go online," he said.

Asked about FMC's move to set volume targets for the futures exchanges, Mr Bhatt said it had been discussed with all the exchanges. "We have discussed with each exchange on how much they can achieve. The targets are realistic," he said.

While many of the exchanges had signed a memorandum of understanding (MoU) on the volume target, BCE was yet to sign. "May be, they will discuss it in their general body meeting and then sign," he added.

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