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Commodity market regulator Forward Markets Commission (FMC) is considering having a single depository house for all the commodity exchanges, besides improving the corporate governance.
The move comes on the heels of ₹5,600-crore settlement crisis at the National Spot Exchange promoted by Financial Technologies. The exchange has stopped trading on its platform since August last year.
Speaking on the sidelines of the “Pulses Conclave 2014”, Ramesh Abhishek, Chairman, FMC, said: “We are examining the possibility of having a single depository corporation for settling trade at all the commodity exchanges.”
Post-NSEL crisis capital market regulator SEBI has instructed Central Depository Services and National Securities Depository to stay away from servicing commodity exchanges. The embattled NSEL was using the services of both NSDL and CDSL for its e-series contracts.
NCDEX, which was using the services of CDSL and NSDL, recently launched its own in-house depository Comtrack, resulting in lower cost for traders. The exchange has already expressed its intention to spin of the depository services into a separate company.
Asked how commodity exchanges can manage with a single clearing house when equity exchanges such as BSE and NSE have separate clearing corporations, Abhishek said there are challenges and various options are being deliberated, but the objective is to work out a solution for having a unified derivative house.
The Forward Contracts Regulation Amendment Bill provides for setting up of a common clearing corporation. The Amendment Bill, which provides wide-ranging regulatory powers to FMC, is before Parliament for clearance.
Now, Abhishek said, the Commission is examining how to promote a common clearing corporation even before the Bill is passed in Parliament.
On the proposed modification in corporate governance, he said the Commission is examining the shareholding pattern of exchange and the role of anchor investor. “We are considering whether we need an anchor investor itself to promote an exchange,” he said.
FMC had directed Financial Technologies, which owns the defaulting NSEL, to reduce its stake in MCX to 2 per cent from 26 per cent. The regulator has also declared Financial Technologies, its promoter Jignesh Shah and key directors Joseph Massey and Shreekant Javalgekar as unfit to represent commodity exchanges. All the affected parties have contested FMC order in the High Court.
Asked whether there is space for new commodity exchange with Indian Commodity Exchange shutting down, Abhishek said, “We want to promote competition to ensure that consumers and investors are benefits. We are not concerned with exchanges viability or profitability.”
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