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The MMTC and Reliance Capital-promoted Indian Commodity Exchange (ICEX) is likely to soon send a revival plan to the derivatives market regulator, the Forward Markets Commission (FMC).
With stringent regulatory norms making commodities futures trading tough and transparent, exchanges have seen a fall in turnover by about 50 per cent in the past one year. ICEX, therefore, suspended trading in April this year. Sources said FMC had told ICEX to give it a clear revival plan by November 15 or announce closure. A senior FMC official confirmed having sent the warning.
A senior board official at ICEX said, “We are optimistic about the turnaround.”
India’s largest commodity futures trading platform, the Multi Commodity Exchange, has 85 per cent of market share. National Commodity & Derivatives Exchange (NCDEX) comes second, with 13 per cent. Ahmedabad-based National Multi Commodity Exchange (NMCE) and Ace Derivatives and Commodity Exchange cumulatively have the other two per cent.
“There has been some positive development. The board (of directors) would decide on the plan and the proposal,” said Ramesh Shetty, official spokesperson of ICEX. He refused to divulge what key changes the exchange is exploring.
Reliance Capital is promoter of Reliance Exchangenext Ltd, which had bought an anchor investor’s stake of 26 per cent from Indiabulls Financial Services. MMTC, the government-owned commodity trading company, continues to remain another anchor investor, also with 26 per cent stake. Since closure of operations, many senior executives have quit. “We will soon start recruitment of professionals. This time, we would appoint experienced people, so that the exchange can generate good business,” said the official.
The consistent loss had resulted in its base capital falling to Rs 25 crore, against the requirement of Rs 100 crore in FMC guidelines. With existing investors not so keen on fresh capital infusion, the exchange had announced trading suspension. “We are in talks with existing as well as some new investors for fresh capital infusion. Once the revival plan is approved, you will see a change in equity structure,” said the official.
The exchange had moved to third slot in terms of turnover in 2013, after NMCE and NCDEX, significantly lost trading volume. Lack of innovation in contracts, coupled with weak trading sentiment, had pulled down exchange turnover tremendously. Since its launch in November 2009, it had continuously incurred losses.
A commodities transaction tax, imposed in July 2013, was perhaps the final spoiler.
