A task force formed by the Forward Markets Commission (FMC) to strengthen regional commodity exchanges has favoured the upgradation of such exchanges to national bourses on a selective basis.
The ?national? status would be accorded only to exchanges that meet parameters like enhanced net worth, demutualisation, proper warehousing and delivery facilities, increased investment for improvement of infrastructure and enrolment of new members. The task force on Regional Commodity Exchanges (RCEs), which was constituted in July 2007 by the FMC with the objective to study the present status of regional commodity exchanges and find out lacunae in the existing framework, submitted its report last week.
Among other recommendations, the task force also suggested in bringing uniformity and professionalism to the functioning of RCEs by evolving model byelaws. India has 17 regional commodity exchanges, most of which deal in a single agricultural commodity such as gur, castorseed, soya oil and pepper, apart from the three national commodity exchanges, namely the Multi Commodity Exchange (MCX), the National Commodity and Derivative Exchange (NCDEX) and the National Multi Commodity Exchange (NMCE).
Of the combined trading value of all exchanges, the market share of the RCEs in terms of value has gone down to just 3% (valued at Rs 1.03 lakh crore) during the financial year 2006-07, from 79% (Rs 1.01 lakh crore) for 2003-04 after the emergence of the three national commodity exchanges in the country.
Major lacunae observed in the existing framework of the RCEs which contributed to the declining market share was the low volume of trading on the single commodity offered for trading, trading dominated by a few members, non-availability of electronic trading platforms, competition from national exchanges and a low level of physical infrastructure.
The task force report also provided suggestions submitted by the RCEs to strengthen their exchanges include the permanent recognition of regional commodity exchanges, common bye-laws consistent with national exchanges, establishing electronic trading platforms, protection in the form of exclusivity in commodities traded at their platforms for a long period, additional commodities to added on to trading platforms and financial assistance for upgradation of infrastructure and increase in membership. The total value of the RCEs has increased to Rs 1.39 lakh crore during 2007-08 from Rs 1.03 lakh crore in 2006-07, indicating a rise of 35% over the previous year. Major contributors to the increase include the National Board of Trade at Indore, and the Ahmedbad Commodity Exchange (ACE).