FMC may not let single entity hold 15%-plus in a comex

FMC norms allow anchor investors in commodity exchanges; under current norms, their holdings must be cut to 26% after five years of operations at an exchange

The Forward Markets Commission (FMC) is considering a change in ownership norms for commodity exchanges. The new norms being considered include a cap of 15 per cent cap on shareholding.

Currently, FMC norms allow anchor investors in commodity exchanges; these investors’ holdings must be 26 per cent after five years of operations at an exchange. However, a few caps exist — a stock exchange cannot hold more than five per cent stake in a commodity exchange, foreign institutional investors cannot hold more than five per cent in a comex, etc.

Earlier, it was decided to allow anchor investors so that they could handhold the nascent commodity market. Now, however, the market is competitive. Regulatory sources said, “The beginning has been made in case of synchronising policies among regulators and as part of that exercise, FMC is considering reviewing norms relating to ownership.”

They added a ceiling of 15 per cent might be proposed for all investors, except foreign ones, for whom the cap is five per cent. Five out of the six commodity exchanges have anchor investors; if the proposed changes are implemented, these investors would be given time to reduce their equity holdings. In new exchanges such as ACE Exchange (anchored by the Kotak group) and UCX (anchored by Ketan Sheth-controlled Comex Technologies), anchor investors hold 40 per cent. According to norms, this has to be cut to 26 per cent after the exchanges complete five years. I-CEX, anchored by the Reliance Group, has two investors with 26 per cent stake — MMTC and R-Next (a Reliance group company).

Among commodity exchanges operating for about a decade, Jignesh Shah-promoted Financial Technologies holds 26 per cent stake in Multi Commodity Exchange (MCX). Following the payment crisis at National Spot Exchange Ltd, Shah is facing a ‘fit and proper’ test by the FMC.

If FMC, after putting the new norms in the public domain for consultation, implements these, all these investors would have to sell additional stake, which would open up a secondary market for the shares of commodity exchanges. FMC has already reduced the role of promoters and investors in the board-level decision making process. Last week, the regulator had issued a fresh reminder to these exchanges that these hadn’t implemented the new board restructuring norms in entirety.

FMC is also considering making the Rs 100-crore net worth criteria applicable at all times. While old exchanges have this net worth, the norms are silent for new exchanges; these merely say the net worth has to be at least Rs 100 crore at the end of first five years. A source said, “At least one comex doesn’t have that much net worth as of now. The exchange is said to be looking for a buyer, but there are some complexities coming in the way of a deal.”