The Hindu Business Line : MCX stake sale may enable product cross listing

NYSE Euronext (NYX) taking a 5 per cent stake in India’s leading commodity exchange, the Multi Commodity Exchange (MCX) is a strategic move by the exchange to increase its existing products as well as to expand geographical presence.

NYX that already has a presence in Indian equity markets through its 5 per cent holding in the National Stock Exchange is now establishing its presence in the commodity market in India as well.

Although the NYX is the leading stock exchange in terms of market capitalisation, presence in India is a tactical move to take advantage of India’s advantageous demographic profile with low penetration of equity and commodity trading.

Commodity trading in India has been decelerating since the second quarter of 2007, though the trading in base metals and energy verticals have witnessed an expansion. MCX with over 74 per cent of the commodity trading pie in India would benefit if the trading interest in commodity futures picks up.

This tie-up is a right step in that direction as MCX can now offer global products from the Liffe (derivative arm of NYX) stable to the Indian commodity traders.

MCX already has launched mini contracts on robusta and white sugar based on the prices of Liffe futures. More such products could be in the offing.

Cross listing of products between MCX and Liffe could also be on the anvil that would increase the turnover on both the exchanges.

Indian commodity traders and investors would also be greatly benefited if MCX adopts technology and sophisticated risk-management practices from NYX.

More Stories on : Commodity Exchanges | Mergers & Acquisitions

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