India's only castor seed exchange at Rajkot downs shutters

Fails to bag Sebi nod for new contracts

Rajkot Commodity Exchange (RCX) – India’s only operational regional exchange for castor seed futures – has stopped its operations after failing to bag the Securities and Exchange Board of India (Sebi)'s permission for new contracts. RCX failed to bag the Sebi nod due to non-fulfilment of compliances set by the regulatory body.

With the Sebi-Forward Market Commission (FMC) merger making it tough for regional exchanges to sustain, RCX had begun counting its days months ago. The exchange saw trading volumes come down to one-10th of what it was in 2004-05.

“We had sent our proposals for new contracts to Sebi in September but haven’t received any permission. Our ongoing December contracts have anyway witnessed zero volumes since the beginning of the month. We met Sebi officials but the response was not positive,” said P B Pathak, executive director of RCX.

The exchange can run the December contract till the end of this month though trading has come to a standstill amid lack of participation from members and traders.

“Some trading did take place till last month, but it was nowhere like the olden times when the ring was full of traders' din. It is not possible for us to live up to these regulatory requirements that include online trading, net worth creation, and de-mutualisation, among others,” said Rajubhai Pobaru, president of RCX.

The exchange has about Rs 50 crore net worth including property. Out of 103 members, currently only 5-10 members actively participate in daily trading. RCX generates about Rs 20 lakh annually through membership fees, trading fees and other sources. The exchange uses the fund for maintenance, salaries and overheads.

Sebi had last year asked all commodity exchanges to start online trading, create a net worth of Rs 100 crore and initiate de-mutualisation within two years.

“Sebi’s approach with regional exchanges has not been positive and after the merger of Sebi and FMC, regional commexes have faced trouble most of the time,” Pobaru added.

Incorporated in 1951 as Rajkot Seeds and Bullion Merchants Association, RCX went on to trade edible oil and castor seed contracts in an unorganised manner till 1991 when it bagged official recognition by the government of India. Later, RCX also started soya oil contracts in July 2010, but as the volumes were not high, the same was closed down within months.