Rajkot ComEx officially shuts down after failing to clinch Sebi approval

It was the country's only regional exchange offering castor seed futures

The year 2017 began on a sad note for the country's only castor seed futures regional exchange, the Rajkot Commodity Exchange (RCX), which has finally pulled down the shutters after failing to bag the Securities and Exchange Board of India's (Sebi's) approval to run new contracts.

Last year, Sebi had asked all commodity exchanges to start online trading, create a net worth of Rs 100 crore and initiate de-mutualisation within two years, which RCX failed to comply with, leading to the closure. For that matter, none of the regional commodity exchanges have complied with the new Sebi norms. There are sixteen such exchanges all across India.

"We have tried our best to convince the regulator, however, they did not understand our limitations as a regional exchange and did not give permission for new contracts. Finally, we have decided to close futures activity," said Rajubhai Pobaru, president of RCX.

Since the first week of December 2016, castor seed contract for the month of December had been inactive and no trading was happening. Traders did not participate after they felt that Sebi will not allow new contracts.

The exchange had already submitted new contract request in September 2016 but Sebi has not given permission saying that the RCX did not fulfil compliances set by Sebi for regional commodity exchanges.

"We had sent our proposals for new contracts to Sebi in September but haven't received any permission. Our 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.

Sebi had asked all commodity exchanges to start online trading, create a net worth of Rs 100 crore and initiate de-mutualisation within two years. However, for RCX, networth creation of Rs 100 crore is not possible and it cannot bear costs of online trading platform and de-mutulisation.

The exchange had held several meetings with Sebi officials and concerned departments of the government of India. However, exchange sources claimed that every time they received poor responses.

"Sebi's approach with regional exchanges has not been positive and after the merger of Sebi and the forward market commission, regional commexes have faced trouble most of the time. 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 Pobaru.

The exchange has a net worth of around Rs 50 crore, including property. Out of its 103 members, only 5-10 members actively participate in daily trading currently. 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.