No exemption for NSE from new equity norms

In a setback for the National Stock Exchange (NSE), the Ministry of Consumer Affairs (MCA) has turned down the equity exchange’s demand for exemption from the revised equity restructuring guidelines relating to its stake in the National Commodity & Derivatives Exchange (NCDEX).

The commodity derivatives market regulator, Forward Markets Commission (FMC), introduced revised equity restructuring guidelines in 2009, which were subsequently amended in 2010. Under these guidelines, a stock exhcange can hold up to five per cent stake in a commodity exchange. Currently, NSE holds 11 per cent stake in NCDEX. It had asked the MCA to increase this to 15 per cent, which the former denied. Following this denial, NSE would now have to reduce its stake in the commodities exchange to five per cent by September this year.

 

The guidelines allow individual entities to hold up to 15 per cent stake in NCDEX. However, anchor investors are permitted to hold up to 26 per cent stake in it.

Seeking either amendment in the revised equity restructuring guidelines to accommodate NSE with up to 15 per cent equity stake in NCDEX or “special treatment” for holding such equity stake, NSE had approached MCA late last month.

“But, the ministry turned down NSE’s request,” said Ramesh Abhishek, chairman, FMC, on the sidelines of the Future of Financial Markets meet organised by Financial Technologies yesterday. NSE officials however, refused to comment on the issue. In its representation to the MCA, NSE said it has added a lot of value to NCDEX being the original promoter and it could offer more value, going forward. Hence, NSE should be allowed to retain higher equity holding, it argued. An MCA official had earlier said the equity norms cannot be diluted for the benefit of one entity.

Jaypee Capital, which holds 22.38 per cent stake in NCDEX, is its only anchor investor. Another investor, Shree Renuka Sugars, holds 12.5 per cent stake in the exchange.