Chicago Mercantile eyes India entry

World's largest exchange in talks with Indian players to buy stake.

The Chicago Mercantile Exchange (CME), the world’s biggest exchange, is looking at entering India. It is in talks with several Indian exchanges to explore the possibility of picking up equity stake.

Sources familiar with the developments said CME was in talks with the Multi Commodities Exchange (MCX), some of the overseas investors in the National Commodity and Derivatives Exchange (NCDEX) and also with the just-born United Stock Exchange of India (USE), promoted by various banks, Metals and Minerals Trading Corporation and Jaypee Capital Market Services.

CME has two major exchanges in its fold, C-Bot and Nymex, and trades in derivatives instruments across markets such as interest rates, commodities, currencies and equities.

Though CME prefers a dominant role in the exchanges where it has equity investment, this would not be possible in India. The government allows a foreign entity only 5 per cent stake in exchanges.

However, the sources said CME would make an exception and opt for a 5 per cent stake as it sees a huge potential for Indian exchanges, going forward.

Goldman Sachs, a leading investment bank, holds 7 per cent stake in NCDEX while the New York Stock Exchange-listed Intercontinental Exchange (ICE), a leading player in energy derivatives, holds 8 per cent. While Fidelity holds a little over 9 per cent in the Financial Technologies group-promoted MCX. Fidelity is also looking for buyers for its stake. All of them will have to reduce their stake to 5 per cent by June as per the rules and are said to be in talks with CME, apart from other investors, to sell their stake.

These investors have asked for extension of time to reduce their stake and the commodity futures market regulator, Forward Markets Commision (FMC) is understood to be in favour of such an extension. The final decision will however be taken by the government.

When contacted, a CME group spokesperson said, “We never comment on what we may or may not do. All we can say is that we continue to look for ways to expand our business to the benefit of customers and shareholders.”

The spokespersons of MCX and USE said they did not want to comment on the subject.