The Hindu Business Line : FMC moots ‘in principle’ nod for new commodity exchange

Mumbai, July 15 Commodity market regulator Forward Markets Commission has recommended in principle approval for Minerals and Metals Trading Corporation (MMTC) and IndiaBulls Financial Services proposal to set up a new commodity futures exchange.

Mr B.C. Khatua, Chairman, Forward Markets Commission, said the proposal had been sent to the Ministry of Consumer Affairs, but there were one or two technical issues which need to be complied with.

FMC has sought clarification on the proposed shareholding pattern and registration of new company for the venture.

After receiving the in principle approval, the new venture has to submit a bank guarantee for Rs 50 lakh within 15 days and start the process of setting up the exchange. FMC will issue the final approval after one year of operation, he said.

According to FMC guidelines, no single shareholder, either individually or together with persons acting in concert, will be allowed to hold more than 40 per cent of the paid up equity capital of the proposed exchange. No individual shall hold more than 1 per cent of the paid up equity capital of the exchange and the total of such individual holdings shall not exceed 25 per cent of the paid-up capital, it said. FMC has formed the guideline for national-level commodity exchange in May.

In October 2007, IndiaBulls proposed that it will hold 74 per cent stake in the special purpose vehicle to be formed for the venture, while MMTC will have 26 per cent. The equity capital of the special purpose vehicle will be Rs 100 crore.

On the registration of a new company, Mr Khatua said the Registrar of Companies had asked the proposed combine to get the Government approval for the venture before registering the company.

It may not be a difficult task for IndiaBulls to bring down its stake to comply with the norms as there are many foreign investors waiting in the wings to take part in India success story. NYSE Euronext recently acquired 5 per cent equity stake in the Multi Commodity Exchange for Rs 220 crore, valuing the exchange $1.1 billion.

Fourth exchange

MMTC is the country’s largest international trading house with an annual trading turnover of $4 billion, while Indiabulls is a leading financial services conglomerate with $4 billion in market cap.

If the venture sails through, it will be the fourth national-level commodity exchange after Multi-Commodity Exchange of India, National Commodity and Derivatives Exchange and National Multi-Commodity Exchange of India, besides 19 regional exchanges.

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