ICEX to re-launch commodity futures trading in December

Awaits MMTC's approval for rights issue, to seek new investors as well, Anil Ambani draws up plan

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Now-defunct Indian Commodity Exchange (ICEX) plans to re-launch futures trading in non-agri commodities by December. The exchange is anchored by MMTC and Reliance ADAG.

“If all goes well, we would like to re-launch commodity futures trading on ICEX by December this year,” said a senior exchange official.

While addressing shareholders of Reliance Capital Ltd in the annual general meeting here on Wednesday, Reliance ADAG Chairman Anil Ambani said, “Reliance Capital now is in advanced stage of preparations of re-launching ICEX and expect to grow the business in a significant manner so as to attain the leadership ranking in three years.”

Ambani added, “The commodity (futures) trading market in India is under-penetrated. Precious and industrial metals hold enormous potential. Daily average commodity volumes in India are a meagre, 0.2 per cent of the gross domestic product (GDP), as compared to Chicago Mercantile Exchange, which enjoys 26 per cent volume of the United States GDP, which constitutes Rs 290 lakh crore.”

Nov 2007: MMTC (with 26% stake) partners with Indiabulls Financial Services (40%) to set up commodity exchange

2008: Union Ministry of Commerce gives nod to ICEX

2009: FMC withholds recognition, ask United Stock Exchange to divest 10%, subsequently sells 5% each to IDFC and Kribhco

Oct 2009: FMC approves recognition of ICEX

Nov 26, 2009: ICEX goes live with bullion and industrial metals

Jan 2011: Reliance Exchange next buys 26% from Indiabulls

Jan 29, 2011: ICEX launched 'iron ore' futures

Nov 2011: MMTC moves to Company Law Board for Indiabulls' stake sale to Reliance

Jan 5, 2014: Shareholders raise questions on 80% erosion in networth to Rs 20-cr

Apr 2014: Suspends futures trading on weak financial performance

Oct 2014: FMC asks ICEX to submit revival plan

Dec 2014: Submits revival plan, FMC dissatisfies, actions on hold due to involvement of govt company

Sept 2015: MMTC board okays stake sale, appoints Yes Bank as Lead Advisor, identifies two buyers with 5% each for estimated accumulative deal value of Rs 20 crore

Source : Reports

In India, all exchanges accumulatively clocked a turnover of nearly Rs 60 lakh crore in 2014-15, a 40 per cent decline from over Rs 101 lakh crore in the previous fiscal.

Five years after its launch in 2009 with its original promoters Indiabulls Financial Services and MMTC, ICEX suspended futures trading in commodities due to weak financial performance. The Reliance ADAG group company, Reliance Exchange next Ltd (R Next), a wholly-owned subsidiary of Reliance Capital, entered into the exchange through purchase of 26 per cent stake from Indiabulls in January 2011.

Since then, the exchange moved at a slow pace. The exchange continued to incur losses. Finally, in April 2014, ICEX suspended trading in commodity futures. The FMC asked ICEX to submit a revival plan by December last year. However, in May 2015, the then regulator Forward Markets Commission (FMC) revised guidelines, and issued a show-cause notice against the exchange for suspending trade for over 12 months.

According to sources, ICEX submitted a revival plan but, the regulator was not satisfied with the proposal. Following this, the regulatory action was put on hold due to the involvement of the government-owned MMTC as its anchor investor.

But, the networth of ICEX eroded to around Rs 20 crore in the financial year 2013-14 and continued thereafter due to expenses on the fixed cost without any major earnings support.

According to an expert, the exchange networth currently stands at Rs 15-20 crore as against the specified limit of Rs 100 crore.

In order to meet the regulatory requirement, ICEX plans to come out with a rights issue for existing shareholders and engage new ones to raise funds to the tune of Rs 40 crore and Rs 100 crore, respectively.

“We are waiting for MMTC to give its go-ahead for the rights issue. After the nod, we will issue rights issue to help infuse capital by existing shareholders and attract new ones,” said the official.

Meanwhile, MMTC, which holds 26 per cent stake in ICEX, has decided to exit the exchange. Early September, its board approved sale of five per cent stake each to two interested individuals/entities.