Commexes to end 2010 with record turnover of Rs 105 trillion

It has been a year to remember for commodity exchanges in the country, with their cumulative turnover set to cross the Rs 100 trillion-mark in 2010 and the government also introducing a Bill in the Lok Sabha that aims to expand the futures market.

The cumulative turnover of the commodity market - trading on which was re-introduced in April, 2003, by the government - is expected to register a 50 per cent jump to a record Rs 105,00,000 crore (Rs 105,000 billion) by the end of this year from Rs 70,00,000 crore (Rs 70,000 billion) last year.

"I expect the overall turnover of commodity futures market would be Rs 105,00,000 crore (Rs 105,000 billion) by 2010-end," commodity markets regulator Forward Markets Commission (FMC) Chairman BC Khatua said.

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He attributed the rise in turnover of the 23 commodity exchanges in the country - including five national bourses - to growing demand after the recovery of the global economy from a low in 2008 and 2009, besides high volatility in bullion and metals trade.

That apart, Khatua said the entry of two new national commodity bourses - ICEX and ACE Commodity and Derivatives - helped the futures market achieve robust growth.

Regional bourse ACE upgraded itself to a national exchange in October this year, while the Indian Commodity Exchange (ICEX) became operational toward the end of 2009.

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The year began on a positive note, with the turnover in the commodity futures market rising every month due to volatility in gold prices, which rose from Rs 17,000 per 10grams to over Rs 20,000 per 10 grams during the course of 2010.

Till November, the combined turnover of the five national and 18 regional commodity exchanges stood at over Rs 94.94,721crore (Rs 94.94 trillion).

The country's largest commodity bourse, MCX, saw its turnover grow by 48 per cent to Rs 78,95,921 crore (Rs 78,959.21 crore), while that of leading agri-commodity bourse.

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NCDEX improved by 39 per cent to Rs 9,73,206 crore (Rs 9732.06 billion) during January-November, 2010.

New entrant Indian Commodity Exchange (ICEX) clocked business of Rs 3,78,006 crore (Rs 3,780 billion), which was higher than the turnover of the oldest national bourse, NMCE.

NMCE's turnover rose by just 6 per cent to Rs 1,80,727crore (Rs 1,807.2 billion) from Rs 1,70,419 crore (Rs 1,704.1 billion) in the review period.

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In addition to the record turnover, the year will also be remembered for the introduction of the much-delayed Forward Contract (Regulation) Amendment bill in the Lok Sabha and a slew of measures taken by the FMC for boosting investors' confidence in the nascent market.

The FMC said it had nursed hopes the FCRA Bill would be ratified during this year's Winter Session of Parliament, as it would have given more powers to the regulator and opened up doors for the launch of new products like options.

The year was also significant from the perspective of investors in the commodity market, with the regulator getting tough on exchanges and brokers to ensure transparency and better governance.

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Not only did the FMC disband the sub-broker system this year, it also amended the shareholding norms for commodity exchanges, making it mandatory for bourses to incorporate government firms on their respective boards with a stake of up to 10 per cent.

It had also made it mandatory for the original promoters to cap their stake in the bourses at a maximum of 26 per cent, as against 40 per cent earlier, while also regulating cross-holding in commodity and stock exchanges.

Although the year saw the lapse of the ban on trading in sugar futures, which was valid till September, the regulator did not permit the re-launch of new sugar contracts, despite expectations of surplus production this year.

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Nevertheless, sugar futures trading are expected to kickoff after the New Year, which will leave only three commodities - rice, tur and urad - in the banned category.

The commodity market has witnessed decent growth for the past few years, but it is hoped the pace will accelerate with the passage of the new FCRA Amendment Bill in 2011, which would pave the way for the launch of trading in a new product - 'options'.

Furthermore, the entry of newer players that are waiting in the wings to enter the lucrative segment, would not only expand the market, but make it more competitive.