The Hindu Business Line : New measures may enhance commodity bourses profile

Mumbai, Dec. 31 Despite commodity exchanges having a tough time in 2007, the Multi-Commodity Exchange of India Ltd (MCX) managed to stand apart due to its focus on the metal segment. Mr Joseph Massey, Joint Managing Director of MCX, discusses the past and future of the exchange in a free-wheeling interview with Business Line

On the fall in turnover in commodity exchanges?

The origin is due to the negative sentiments arising from the delisting of a few agricultural commodities and some regulatory measures taken in the wake of rising prices during the early part of the year.

However, our business also got impacted in agricultural commodities and partly in others due to the negative sentiment.

Government policy impact on the exchange?

The Foreign Contribution (Regulation) Act (FCRA) amendment Bill is still pending parliamentary approval and policy initiatives will make the market to strengthen itself.

We expect new measures next year will enhance our product and participant profile.

How has 2007 been for the commodity exchange?

It was the ‘year of consolidation’. The exchanges were able to weather the negative sentiments that followed the delisting of wheat, rice, urad, and tur.

While increased corporate participation kept the metals counter busy, the revamp of existing contracts and launching of new commodities helped the agricultural vertical to grow in volumes. Energy verticals also witnessed a healthy growth with a few of the public sector crude distillates marketing companies evincing interest. Despite low volatility, commodity derivatives ended the year with a healthy growth as in the past.

Expectations for 2008?

On the policy front, the industry is keen to see banks, mutual funds and foreign institutional investors being allowed to participate in commodity futures trading. This will bring in the required depth in the market and improve liquidity.

Approval for option trading will offer one more instrument for risk management, especially to farmers who find it difficult to deposit mark-to-market margins.

Amendments to the FCRA will enable the launch of index-based instruments and derivatives such as index-linked futures and options, sector-based derivatives, and weather derivatives.

The focus for 2008?

We will continue to focus on transparency, education, inclusive participation of all stakeholders and strengthening the intra-structure of exchange and support institution.

We would give more emphasis to reaching uncovered areas by further strengthening the price dissemination process, besides providing training programmes for farmers.

We will encourage more corporate, hedgers and farmers’ participation.

We would also focus in the capacity-building of our intermediaries to service the need of the large Indian market to ensure that the benefits of a commodity exchange reach the direct and indirect beneficiaries.

What were the major milestones of 2007?

MCX continued to make good progress in the global and domestic arena. We entered into strategic partnerships with the Agricultural Futures Exchange of Thailand and Shanghai Futures Exchange (SHFE).

On the investor front, leading global and domestic financial service providers — Citi group, Merrill Lynch, ICICI, IL&FS and the Kotak Group — picked up stakes in MCX. The exchange has become the largest silver exchange in terms of the number of contracts traded, the second largest in natural gas, the third largest bullion exchange after NYMEX and TOCOM, and also the third largest exchange in crude oil and among the top 10 commodity derivatives exchanges in the world.

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