Mumbai, May 6: The Forward Markets Commission (FMC) today brought in sweeping changes to the way in which commodity exchanges (commexes) in the country are owned and operated.
The commodities market regulator not only did away with the concept of anchor investor in these bourses but also stipulated that the bourses must always have a minimum net worth of Rs 100 crore.
Further, while resident individuals can hold up to 5 per cent, banks, insurance companies and bourses can either individually or together own up to 15 per cent. These improvements, aimed at institutionalising commodity exchanges, were today notified by the FMC and will come into effect immediately.
The FMC has given the bourses 45 days to incorporate the revised norms that not only cover shareholding pattern and net worth but also fit and proper criteria for ownership. The nation’s six commodity exchanges have been told to report their compliance by June 23.
The FMC today said at least 51 per cent of the paid-up equity share capital of a recognised commodity exchange should be with the public.
While the combined holding of foreign residents has been kept at 49 per cent, there is a sub-limit of 26 per cent on foreign direct investment (FDI) and 23 per cent for foreign institutional investors (FIIs). FIIs can only acquire shares of a commodity exchange through the secondary market.
However, a resident outside India cannot individually or with persons acting in concert hold more than 5 per cent in a commodity exchange. The same rule also applies to resident individuals.
The FMC has permitted a higher limit to some categories of investors. Stock exchanges, depositories, banks, insurance companies and public financial institutions may either individually or together with persons acting in concert hold up to 15 per cent.
The NSE will welcome this clause as it can now look to raise its stake in the National Commodity & Derivatives Exchange.
Every commodity exchange should also have a minimum net worth of Rs 100 crore at all times. Exchanges that do not have this net worth have been given three years to achieve the stipulated level.
Commodity exchanges have been barred from distributing profits to its shareholders until they reach the desired net worth.
The FMC has also brought in a “fit and proper” person criteria for those holding a significant stake in the bourse. Such a person should have a reputation of fairness and integrity and should not have incurred any dis-qualifications, including conviction by a court.
If a person ceases to be “fit and proper”, such a person will have to divest his shareholding in the bourse. Pending divestment of shares, his voting rights shall stand extinguished and the exchange can take necessary steps to ensure that the holding is divested.
Jignesh Shah-led FTIL, which has been declared unfit to run an exchange and ordered to pare its stake in MCX to 2 per cent, will have to divest its entire stake under the new guidelines. Opposing the fresh norms, FTIL said: “The legality of issuing guidelines under FCRA (Forward Contract Regulation Act) is already before the Bombay High Court and despite that FMC has issued another set of norms which are exceeding the provisions of FCRA 1952 and hence ultra vires (beyond one’s authority).”