NCDEX withdraws circular on transaction charges

The National Commodity & Derivatives Exchange (NCDEX) has restored the transaction charges it had reduced over a week ago, following the Bombay High Court’s refusal to admit the exchange’s plea against the commodity market regulator.

The country’s second largest commodity derivatives exchange in its circular dated February 7 informed its trading and clearing members that the implementation of reduction in transaction charges has been kept in abeyance with immediate effect without prejudice to any right of the exchange to seek any further judicial or non-judicial remedy as advised by its legal advisors.

Immediately after the exchange’s circular, informing about the change in transaction charges, was hosted on the website on January 28, the Forward Markets Commission (FMC) had advised it to keep its implementation in abeyance.

The exchange had thereafter sought a stay of the FMC directive from the High Court, which was declined for the reasons that the reduction in transaction charges would create unfair competition among participants. The existing requirements relating to annual advance minimum transaction charges shall continue, the exchange circular clarified.

The withdrawal assumes significance as this is seen to set a precedent for all exchanges to adhere to the regulator’s directives in future, which was clarified while granting the recognition of the commodities trading platform.

With the current decision, trading and clearing members will have to pay Rs 4 per lakh of average daily business transacted on the NCDEX worth up to Rs 20 crore.

The transaction charges will vary, however, on incremental basis, which will be at Rs 3 per lakh of average daily turnover (ADTV) between Rs 20 crore and 50 crore. The charge will reduce further to Rs 2 per lakh for traders and clearing members attracting ADTV between Rs 50 crore and 125 crore and Re 1 for all above Rs 125 crore.

In contrast with the uniform transaction charges, NCDEX had proposed a drastic change with Rs 3 per lakh of ADTV between 10 am to 5 pm and a mere 5 paise per lakh of ADTV between 5 pm and 11.30 pm.

Earlier, in the last week of December, a similar proposal with a little variation in timing up to 3.30 pm was also kept in abeyance by the FMC.

The NCDEX’s withdrawal was anticipated since the Bombay HC pronounced its decision rejecting to admit the exchange’s appeal on February 5 and the decision was closely linked to the recognition of the exchange.