ICICI Bank will pick up a 25 per cent stake in the new National Commodities and Derivatives Exchange. The rest of the equity will be held in equal proportions, 25 per cent each by its partners, the National Stock Exchange, the Life Insurance Corporation of India and the National Bank for Agriculture and Rural Development. The total capital of the exchange will be Rs 60-80 crore.
P H Ravikumar, senior general manager, ICICI Bank, who will be the first managing director and CEO of NCDEX, told Business Standard that besides nominees of the partners, the board of the exchange would have a maximum of 11 directors.
Ravi Narain, managing director, NSE, S B Mathur, chairman, LIC, Y Nanda, chairman, Nabard, BV Bhargava, chairman, Crisil, Ajay Shah, S H Bhojani and Lemon Rutten, representative of Unctad, have already been inducted on the board. The exchange will have the demutualised and corporate model, similar to that of the NSE.
At its first meeting held recently, the board decided to launch futures trading in gold, silver, cotton, soya oil, castorseed oil and palm oil by August.
Each of these products will have three contracts, similar to those for equity derivatives. The three contracts in each commodity will be the near month, the middle month and the far month, making for a total of 54 contracts to begin with. NCDEX is awaiting approval of the contracts by its regulator, the Forward Markets Commission.
"We have primarily taken the base metals OTC market of London and the London Metal Exchange for gold and silver, the Chicago Board of Trade and the Chicago Mercantile Exchange of the US for other products," Ravikumar said.
Since all the 75 commodities are now eligible for derivatives trading, the exchange will introduce all of them in phases by the end of December 2003.
NCDEX is also planning to introduce a gold index and trading in the index.
"We will have similar indices for different commodities and will introduce trading in these indices at a later stage," Ravikumar said. "We will also have indices for a basket of commodities and trading in them will be similar to the Sensex or the Nifty," he added.
The project cost which had initially been estimated to be about Rs 80 crore has now been scaled down as the technology cost has dropped. "The cost is expected to be lower and will range between Rs 60-80 crore," Ravikumar said.
ICICI Bank has also approached the Centre for an amendment to the Banking Regulation Act to allow banks to operate as market makers in commodities. "We are looking at the possibility of introducing market makers in the exchange to provide depth to trading," Ravikumar said. NCDEX will use NSE's nationwide network as a platform for trading.
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