FMC urges investors to actively monitor comexes

Asks them to be involved in operations, investments, collateral management and corporate governance

The Forward Markets Commission (FMC) wants institutional investors to be more pro-active in the way commodity exchanges are managed. It made this clear on Tuesday, at a meeting it had convened on the issue.

As already reported, the regulator has issued guidelines that half the directors on the board of a comex shall be from public institutions. The FMC has also capped the board representation of anchor investors to the proportion of their equity holding.

For institutional investors, investment in a commodity exchange is not very much compared to their total investment book. Also, since the investment’s face value decreases in proportion to the total over time, their exposure gets limited and, hence, they take lesser interest. However at Tuesday’s meet, FMC asked them to be active in operations, investments, collateral management and corporate governance of the exchanges.

According to a person who was present, it apprised them about its new guidelines and said institutional investors whose stake wasn’t big enough to demand a board seat should combiner and press for a  common representative.

Tuesday’s meeting of institutional investors was with those having a shareholding of over one per cent in the exchanges.

Recently, the regulator is also understood to have told investors that private investors should not be allowed over five per cent in case of any new stake transfer. However, this change hasn’t been formalised.

FMC was recently brought under the Union ministry of finance. Sources say policy convergence between FMC and the capital markets regulator, the Securities and Exchange Board of India, is under consideration. Unlike in stock exchanges, there is a concept of anchor investors in comexes; such an investor can hold up to 26 per cent stake in the exchange even after five years of operation. Sources believe, “in the next stage the regulator might ask comexes to do away with the concept of anchor investors in the name of demutualisation”. The latter step has been recommended by the Mayaram panel which probed the National Spot Exchange payments crisis.