Q&A: Dilip Bhatia, CEO, ACE Derivatives & Commodity Exchange

'Commodity derivatives offer huge scope for growth'

Recently given membership as a national-level commodity futures trading platform, Ahmedabad-based ACE Derivatives and Commodity Exchange plans to commence activity next month, Dilip Bhatia, CEO, tells Dilip Kumar Jha. Edited excerpts :

What is the current status? Have you started members' registration?
ACE has received all the regulatory approvals and is planning to start nationwide operations next month. The technology platform and operating framework are fully ready and member-registration process is in progress. The response has been encouraging and we expect to start with more than 200 registered members.

National status would require huge promotional effort in major commodity production and consumption centers. Are you planning any investment on this?
ACE has been adequately capitalised to meet the FMC (Forward Markets Commission) norms fore national exchanges. The current net worth is well over Rs 100 crore and the Kotak group holds 51 per cent stake. Kotak is fully committed to the growth and development of ACE as a premier commodity exchange in India and would be making the required investment in the business as and when required

The exchange's expertise is in oilseeds and oils. National accreditation will allow it to introduce newer contracts in agri and non-agri commodities. Which sector do you see as the exchange's prime focus?
The product strategy of ACE would be multi-commodity across segments (metals, energy, as well as agri). We would sequence the launch of the commodities based on market demand, to ensure sufficient time and space for stabilising each commodity/segment. In the medium term, we would endeavour to dominate select commodity verticals in which we are operating

Existing exchanges have already acquired satisfactory market share. Where do you see room for newer commodity exchanges?
India is one of the top producers of a large number of commodities and also has a long history of trading in commodities and related derivatives. The market has made enormous progress in terms of technology, transparency in trading activity and market penetration. The current exchanges have done a reasonably good job in spreading awareness about the commodity futures trade and this shows in growth in volumes over the past few years.

However, when compared to developed nations, the market is still nascent. Not more than 12-15 products have been able to achieve respectable liquidity. We believe there exists a large potential and need for a new platform in the market to strengthen this momentum.

ACE is focused on serving the needs of commodity market participants through introduction of relevant products and services, an innovative and cutting-edge technology platform, robust delivery infrastructure and globally benchmarked practices.

Has the time come to introduce specialised commodity exchanges to avoid fighting for the same commodity space?
In the global environment, exchanges dominate a specific commodity basket/segment and over time, have become a benchmark exchange for that segment/basket. With the development of commodity derivatives trade in India and entry of new players, we believe over time all exchanges will create a niche for themselves and operate and dominate a specific vertical.

Do you think a consolidation is looming for the commodity exchanges' business?
The commodity derivatives market is still at a nascent stage and there exists huge scope for growth. Given the size and diversity of our commodity sector and anticipated reforms, new players will create a healthy competition and encourage innovation. Over a period, each will find its own area of dominance and at that time, we see possibilities of alliances. Anyway, FMC, the regulator, has made its intent clear to restrict the number of players in the commodity exchange space to eight and it is a welcome move.