Big players to set up commodity exchanges in India

Futures trading in commodities in India is all set to witness the entry of big financial players as groups like Reliance, Kotak and Indiabulls are chalking out plans to set up commodity exchanges in the country.

The Indian government recently had banned futures trading in a few commodities. But this has not dampened major companies to eye futures trading in commodities.

Last week, government permitted companies with an initial capital of Rs 100 crore to set up commodity exchanges. Top officials in the Anil Dhirubhai Ambani Group and Kotak Mahindra said that they are planning to set up commodity exchanges.

”Yes, we are chalking out a plan to set up a national commodity exchange. Details of the project will be announced soon,” a senior Reliance official associated with the project told Commodity Online.

Similarly, Kotaka Mahindra has already taken a majority stake in the regional Ahmedabad Commodity Exchange as part of its plans to set up a national commodity exchange. Indiabulls, a major financial services player, has also inked agreements with MMTC to set up a national commodity bourse.

Last week, Forward Markets Commission (FMC) last week released detailed guidelines for grant of recognition to new commodity exchange under the Forward Contracts Act as the futures market has grown significantly in the past few years.

The guidelines provide the much awaited framework as a number of companies had previously showed interest to launch new commodity exchanges. As per the guidelines, companies or a consortium of such firms can file applications to the commodity futures market regulator for setting up an exchange with a minimum capital base of Rs 100 crore.

However, they outline that it should be a public limited company and at least 26 per cent equity stake of any proposed national-level exchange should be held by a government company.

The guidelines stipulate that institutional investors including stock or commodity exchanges, banks, co-operative societies and federations manufacturing agri inputs should own at least 20 per cent.

These corporate houses are getting lured to huge growth potential in the Indian commodity market, which is already of the size of close to one trillion dollars and could gain further given a continuing bull run across the world in this segment for over five years now.

Currently, India has three national commodity exchanges—the Multi Commodity Exchange (MCX), the National Commodities and Derivatives Exchanges (NCDEX), and the National Multi Commodity Exchange (NMCE). Recently, the Bombay Stock Exchange picked up a strategic stake in NMCE.