FMC awaiting FCRA bill approval to strengthen regional bourses
New Delhi (PTI): Commodity market regulator FMC is awaiting the passage of FCRA amendment bill to strengthen and reform regional exchanges whose falling turnover has become a major cause of concern.
In 2008, business from 19 regional commodity bourses fell drastically by 31.83 per cent at Rs 84,342 crore as compared to Rs 1,23,729 crore in the previous year, the official data showed. The share of regional bourses is less than one per cent of the total commodity market turnover of Rs 50,33,857 crore.
"We are looking forward for the amendment of the Forward Contract Regulation Act (FCRA) 2006. Once the bill is passed, we will have more powers to strengthen regional commodity exchanges," Forward Markets Commission (FMC) Chairman B C Khatua told PTI.
There are few exchanges where volumes are either thin or zero, he said, adding that the turnover at commodity bourses like Kolkata-based East India Jute and Hessian Exchange and Bhatinda Om Oil exchange Ltd have almost been nil in the last few years.
Except for Indore-based National Board of Trade (NBOT), which had an average turnover of about Rs 5,000 crore per month in the last year, rest of the exchanges' business stood below Rs 600 crore per month, according to the analysis of the turnover data maintained by the regulator.
Asked whether the regulator would close down the non-performing bourses, Khatua said, "We will take a call after the FCRA bill is passed. If regional bourses are asked to demutualise, then they will have to decide -- either they improve trading volume or close it".
The regulator said an early completion of FCRA bill formalities would give more teeth to bring reforms at regional exchanges.
The proposed amendments aim at providing greater autonomy to FMC on the lines of securities market regulator Securities and Exchange Board of India (SEBI).
ARPL Agri Business Services, Managing Director, Vijay Sardana said, "There are two ways of looking at the poor performance of regional commodity bourses.
Many of the regional exchanges are actually run by industry associations, so they pay less attention to service and concentrated more on revenue generation. Because national exchanges offer better service, clients shift from regional exchanges. This is affecting the turnover."
Noting that the operational cost in regional exchange is more due to poor infrastructure, he said that however, overall performance of all exchanges need to be monitored by FMC to ascertain whether a real trading is taking place or not.
Market experts of the opinion that regional commodity bourses are in the verge of closing on the lines of 22 regional stock exchanges, which have become virtually extinct. At present, Bombay Stock Exchange and the National Stock Exchange of India are dominating the equity market.
A similar trend is seen in the commodity futures market, where national level exchanges -- MCX, NCDEX and NMCE -- have maximum market share, they said.
Agri. & Commodities