Commodity futures likely to be thrown open to foreign brokers

Aug 30 | Updated: Aug 31 2006, 05:30am hrs
India may let overseas securities firms such as Merrill Lynch & Co offer brokerage services as a first step in opening the nations $458 billion commodity futures markets.

The government, which is changing rules to allow overseas investment in gold, silver, non-ferrous metals and oil, has had expressions of interest from several foreign funds to enter its commodities markets, Forward Markets Commission chairman S Sundareshan, said in an interview on Tuesday.

India, the second-biggest producer of sugar and rice, is the largest buyer of gold and hosts the worlds No 3 bullion bourse after exchanges in London and Tokyo. Overseas companies are banned from trading in Indias 500 commodity markets.

Competition is going to get tougher, Kishore Narne, head of Anand Rathi Commodities Ltd., said in Mumbai. It seems to be a clever way of allowing foreigners in Fidelity International Ltd, a unit of the worlds biggest money manager, paid $49 million for 9% of Multi Commodity Exchange of India Ltd, the nations largest commodities exchange, in February. Goldman Sachs Group Inc. owns a 7% stake in the National Commodity & Derivatives Exchange Ltd, the second-largest.

The value of the trades in Indias 24 largest commodities markets surged almost fourfold to 21.34 trillion rupees ($458 billion) in the year ended March 31, according to the Forward Markets Commission. The value of trade was 14 trillion rupees between April 1 and August 14 this year.

We have been approached by several players like Merrill Lynch, Sundareshan said. Mona Kwatra, spokeswoman for the Indian unit of Merrill Lynch, the third-biggest US securities firm, declined to comment.