MCX gets nod to begin stock exchange operations

Friday, 31 October 2008, 07:00 Hrs
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New Delhi: After launching carbon trading and currency futures, the Multi Commodity Exchange (MCX), a leading Indian bourse, has secured the nod from markets watchdog Securities and Exchange Board of India (SEBI) to start stock exchange operations in the country.

"We've just got the licence to start a stock exchange. We have domain expertise in many areas and it was only logical for us to leverage that expertise," said Setu Shah, the vice-president of market communications for the exchange.

"We are studying the issues involved. So it will take some time to launch actual stock market operations," Shah told IANS, adding an affiliate of New York Stock Exchange (NYSE) has five percent equity in MCX - the maximum allowed by India.

The diversified exchange, promoted by the Mumbai-based Financial Technologies Group, had introduced carbon credit trading this year and has a strategic tie-up with the Chicago Climate Exchange to tap the $60- billion global market.

Carbon credits are generated by enterprises in the developing world by using cleaner technologies that help them save on energy consumption and consequently reduce their greenhouse gas emissions.

For each reduced tonne of carbon dioxide emission, an organization receives a carbon emission certificate under a United Nations mandate. This can be sold either immediately or through a futures market, just like any other commodity.

Freight futures are another promising market for the exchange for which it has a strategic collaboration with the London-based Baltic Exchange, which is one of the world's leading shipping markets.

The rising cost of freight impacts the prices of commodities and can add up to 10 percent of the total trade cost. With freight futures, cross-border traders and other stakeholders can hedge their risks against volatility in freight rates.

MCX, which started operations five years ago, has spot and futures trading in 60 commodities with a focus on energy basket and metals.

It launched currency futures trading earlier this month and notched an average daily trading volume of 3-6 billion, compared to 20-40 million for the Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE), Shah said.

This is despite the fact that the NSE has more members in its currency futures segment than MCX, as data with the watchdog says NSE has 470 members, compared with 403 for MCX and 157 for BSE for currency futures trading.

MCX is now a widely held company and some of the key shareholders include the State Bank of India, National Bank for Agriculture and Rural Development (NABARD) and the National Stock Exchange (NSE), besides several banks and financial institutions.

Some of the private sector shareholders include Corporation Bank, HDFC Bank, Bennett Coleman and Company, Fidelity International, Infrastructure Leasing and Financial Services, Kotak group, Citibank and Merrill Lynch.
Source: IANS
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