NMCE, ICEX to merge to create India’s third biggest commodity exchange
National Multi Commodity Exchange (NMCE), India’s first demutualised online national multi-commodities exchange will merge with Indian Commodity Exchange (ICEX).
The merged entity will create India’s third biggest commodity exchange. The largest commodity exchange by volume is the Multi Commodity Exchange (MCX) followed by National Commodity and Derivatives Exchange (NCDEX).
This is the first merger deal in the commodity exchange space in India. It has been approved by the boards of both exchanges and is expected to be completed by December 2017, subject to regulatory approvals. In the merged entity, the ICEX will hold a 62.8% stake, while NMCE shareholders will own the rest.
The new exchange will offer a wide range of contracts, including bullion, oil, rubber, and other agri-commodities. It will also offer the world’s first diamond futures contract, which has already received in-principle approval from the marker regulator SEBI.
The merger will help ICEX to further strengthen its position in the country’s fast-growing commodity derivatives market. It will result in greater financial strength, the consolidation of clients and members, an enhanced product basket, and higher operational synergies.
Commodity trading in India
Commodity trading is an exchange where various commodities and derivatives products are traded. Most commodity markets trade in agricultural products and other raw materials and contracts based on them. These contracts can include spot prices, futures, forwards and options on futures. Other sophisticated products may include interest rates, environmental instruments, swaps, or ocean freight contracts.
Commodity trading in India has a long history. In fact, commodity trading had started in India much before it started in many other countries. However, years of foreign rule and Government policies had caused the commodity trading in India to diminish. It was restarted recently.
At present, India has six national commodity exchanges namely, Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), National Multi-Commodity Exchange (NMCE) and Indian Commodity Exchange (ICEX), ACE Derivatives exchange (ACE) and Universal commodity exchange (UCX) apart from numerous regional exchanges.
Government had established regulatory body is Forward Markets Commission (FMC) in 1953. It was merged with the Securities and Exchange Board of India (SEBI) in September 2015.