Easy run for investors in comexes

The department of consumer affairs under the ministry of food and consumer affairs has suggested that there should be no cap for investment by domestic institutions in commodity exchanges.

This is in contrast to the earlier view of the finance ministry, which had suggested that the stakeholding by a single entity in a commodity exchange should be capped at 5 per cent in line with the norms for stock exchanges.

FUTURE'S BRIGHT

The department of consumer affairs does not want a cap on the investment limit for domestic institutions in commodity exchanges

This is in contrast to the earlier view of the finance ministry, which had suggested a single-entity investment limit of 5 per cent in comexes

The development assumes significance as the ministry of consumer affairs has "in principle" approved the proposal of the BSE to pick up a 26 per cent stake in NMCE

Foreign entities will continue to face the 5 per cent limit for investments in domestic commodity exchanges

When contacted, B C Khatua, chairman, Forward Markets Commission (FMC), told Business Standard, "I personally believe that since the commodity futures market is in the initial stage, there has to be an anchor investor who is there for a longer term and has interest in taking the exchange forward rather than just remaining a financial investor." He said the lead investor should be committed to the development of the exchange.

The development assumes significance since the ministry of consumer affairs has "in principle" approved the proposal of the Bombay Stock Exchange (BSE) to pick up a 26 per cent stake in the Ahmedabad-based National Multi Commodity Exchange (NMCE).

The proposal has also been approved by the commodity market regulator. The NMCE declined to comment on the stake sale, but it is learnt that the BSE is coming in as a strategic investor.

However, foreign entities will continue to face the 5 per cent limit for investments in domestic commodity exchanges. The Department of Industrial Policy and Promotion is in the process of preparing a revised Cabinet note on the investment norms in commodity exchanges.

Meanwhile, ICICI Bank has exited the National Commodity & Derivatives Exchange (NCDEX). The bank has sold its balance 8 per cent stake to the Inter Continental Exchange (ICE) recently. The ICE is a New York Stock Exchange-listed diversified commodity futures exchange.

ICICI Bank, which was the chief promoter of the NCDEX, had sold 7 per cent equity to Goldman Sachs last year.

ICICI's sale of 15 per cent stake in the NCDEX to both the foreign investors has been cleared by the government, but is subject to the final guidelines for foreign investment to be announced by the government.

After the exit of ICICI Bank, the National Stock Exchange (NSE) has assumed the role of the lead promoter with a 15 per cent equity holding. According to the NCDEX website, the NSE, Life Insurance Corporation (LIC) and Nabard hold 15 per cent each, while the ICE holds 8 per cent and Goldman Sachs 7 per cent.

The department of consumer affairs is in favour of lifting cap on investment limit for domestic institutions in commodity exchanges.

This is in contrast to the earlier view of the finance ministry, which had suggested a single-entity investment limit of 5 per cent in comexes.