NCDEX raises $88 million from brokers ahead of equity foray, says CEO

India's National Commodity and Derivatives Exchange (NCDEX) has raised $87.99 million from global trading firms and domestic brokers as it plans to launch equity offerings within the next twelve months, its chief executive said.

The exchange, which dominates agricultural commodity trading in India, received in-principle approval from the markets regulator in July to launch equity and equity derivatives trading.

Global firms including Citadel Securities, Tower Research and Acacia Partners will each buy a 1%-2% stake in the exchange, Chief Executive Arun Raste said in an interview on Tuesday.

Kenneth Griffin-founded Citadel Securities will invest 170 million rupees ($1.94 million), while U.S. based high frequency trading firm Tower Research will put in 340 million rupees ($3.89 million), Raste said.

 

India's largest online broking firms - Zerodha and Groww - have also submitted binding bids to invest, he added.

"We targeted raising funds from high frequency trading firms, broking firms and HNIs who are active traders. These investors will have skin in the game," said Raste.

Citadel, Tower Research, Acacia, Zerodha and Groww did not respond to emails seeking comment.

Raste did not disclose the deal-making price, but NCDEX shares trade at 350 rupees in the unlisted market, sources said. The bourse's equity expansion comes as regulators seek to cool a surge in derivatives trading.

India's markets regulator tightened trading rules in July and temporarily barred US high-frequency firm Jane Street over alleged manipulation.

The firm earlier told Reuters it complied with Indian law, but though cleared to return, it has yet to resume trading.

Raste said that while trading volumes have reduced because of the regulator's steps, there is potential to expand the market.

"Due to our mainstay being agricultural commodities our trading members mostly cater to smaller towns. This reach into India's hinterland could lead to more participation from smaller towns in India's regulated equity market," he said.

"The exchange will first offer trading in equity then equity derivatives in about a year," said Raste.

Analysts have said equity trading is key to NCDEX's survival, with the Securities and Exchange Board of India set to extend its ban on futures trading in seven key agricultural commodities until March next year to keep food inflation in check.