CME Group eyes 15% stake in MCX

Move follows govt decision to increase foreign investor holding in a commodity exchange to 15% from 5% earlier

CME Group, one of the world’s largest derivatives exchanges, is planning to take 15 per cent stake in India’s only listed commodity bourse — Multi Commodity Exchange (MCX). The move follows the government’s decision to increase foreign holding in Indian commodity exchanges to 15 per cent, from five per cent earlier. Currently, a single investor cannot own more than 15 per cent in a commodity exchange. “CME had placed a non-binding bid in 2014 when Financial Technologies (India) Ltd or FTIL had to sell 26 per cent stake in MCX,” said a source.

Shares of MCX on Thursday ended at Rs 851, valuing the exchange at Rs 4,340 crore.

CME declined comment. The largest shareholder in MCX is Kotak Mahindra Bank, which owns 15 per cent, followed by Blackstone, 4.8 per cent, and Axis Mutual Fund, 4.61 per cent. Selling shareholder couldn’t be confirmed.

CME Group has two major exchanges: C-Bot and Nymex. It trades in derivative instruments across markets such as interest rates, commodities, currencies, and equities. According to the source, CME had met the Forward Markets Commission (FMC), the then regulator of commodity market, in 2014, to bid for FTIL’s stake in MCX. CME had expressed interest in buying shares as part of a group of investors. The FMC had reportedly told CME that a group bid may be classified as persons acting in concert, and, hence, all investors bidding would have to give an undertaking that they were buying the shares independently.

Disclaimer: Kotak Mahindra and associates are significant shareholders in Business Standard Private Limited

This seems to have discouraged the consortium members. Later, the FMC had changed the norms for shareholding in exchanges.

FMC was merged with the Securities and Exchange Board of India last year.

In July 2014, FTIL had signed an agreement to sell 15 per cent stake in MCX to Kotak Mahindra Bank for Rs 459 crore. FTIL then held a 26 per cent stake in MCX and had to divest most of its stake after FMC had declared the company unfit to run any exchange in the wake of Rs 5,600-crore payment crisis at group company National Spot Exchange Ltd (NSEL).

The regulator had asked FTIL to reduce its stake in MCX to two per cent from 26 per cent.