Bajaj's SFX may lose recognition

Two more exchanges may meet similar fate

The Forward Markets Commission (FMC), the commodity markets regulator, is likely to withdraw recognition to Mumbai-based Esugarindia Ltd, the country's first online sugar futures exchange (SFX).

The move will make Esugarindia the second exchange, after New Delhi-based e-Commodities, to be derecognised by the regulator.

The Shishir Bajaj-promoted single commodity exchange was launched in 2003 with approximately 150 trading members, and generated a daily turnover of around Rs 10-12 lakh.

But trading on this platform came to standstill in February 2007 because of the downward cycle in sugar and as national commodity exchanges launched sugar futures from their platforms among other agri and non-agricultural commodities.

The exchange also showed lack of interest by not renewing its licence, which expired in June last year. Though the commission wrote to the exchange two months ago, the exchange failed to respond within the stipulated 15 days time, prompting the regulator to request the government to withdraw recognition.

"We will send our recommendation to the government shortly to derecognise Esugarindia Ltd," an FMC official said.

The development is significant as the market demands more participants in futures trading for transparency and adequate risk management.

According to experts, single or regional commodity exchanges have lost volumes to better infrastructure and pan-India online trading facilities provided by national commodity exchanges.

The FMC had recently withdrawn recognition to New Delhi-based e-Commodities Ltd because of non-performance.

The exchange, promoted by a group of sugar producers and traders, which focused on sugar futures failed to take off after receiving recognition in 2001.

Though the exchange, promoted by P Rama Babu, MD, EID Parry (India), S L Jain, Director General of Indian Sugar Mills Association (ISMA) and V K Gupta among others, was put for sale about two years ago, there were no takers.

The commission is now closely monitoring the exchange run by East India Cotton Association, Mumbai and the Spices and Oilseeds Exchange, Sangli.

"We are in the process of drafting guidelines to revive single commodity exchanges as they possess hardcore domain knowledge of region-based trading members. If they fail to revive their fortunes, they will need to redefine their future course of action," said FMC Chairman B C Khatua.

Eighteen out of 19 regional commodity exchanges in India are under threat from bigger national exchanges.