Govt clears ICEX's iron ore futures contract

May get final approval from FMC soon.

Paving the way for the Indian Commodity Exchange (ICEX) to launch iron ore contracts for futures trading, the Ministry of Consumer Affairs, Food and Public Distribution has asked the Forward Markets Commission (FMC) to include the mineral in the list of commodities that can be traded.

The communication, sent a week ago, said iron ore be included in Section 15 of the Forward Contracts Regulation Act (FCRA), which allows FMC to grant exchanges permission for futures contracts.

The ministry, said industry experts, notified the inclusion on September 29. The official communication to FMC was pending until a week before.

With this, decks are clear for ICEX, promoted by Indiabulls and government-owned Minerals and Metals Trading Corporation, to launch iron ore contracts, provided FMC grants the final approval, which the exchange expects can come any time. “Yes, we have received the ministry’s communication to include iron ore in Section 15 of FCRA,” said FMC member Rajeev Agarwal.

ICEX had applied to FMC about six months ago. FMC, in turn, wrote to the ministry, to whom it reports.

FMC might also approve contracts for commodities not listed in Section 15 of FCRA, said Director Anupam Mishra. Citing the example of coal, Mishra said minerals were allowed to be traded on futures commodity exchanges.

“We received the last communication with regards to iron ore contracts from FMC on September 13. Since then, the matter was pending with the ministry of consumer affairs (food and public distribution). Now, because the ministry has supported futures trading in iron ore, we expect FMC to approve the contract soon,” said Sanjay Chandel, CEO of ICEX.

ICEX requires 15-20 days from the date of approval to launch the contract. The exchange is betting big on iron ore contracts, which it believes will be a great success, being the only platform for this. Earlier, ICEX had signed an understanding with the Delhi-based Federation of Indian Mineral Industries to develop iron ore futures. India produces nearly 225 million tonnes iron ore a year and consumes 55 per cent of that. The rest is exported, mainly to China.