Regulator says no resident individual can hold more than 5% stake in commodity exchanges and scraps the concept of promoters and anchor investors for such bourses

Mumbai : Tightening shareholding norms of commodity exchanges after the NSEL crisis, regulator FMC said that no resident individual can hold more than a 5 per cent stake in them and scrapped the concept of promoters and anchor investors for such bourses.

In an eight-page document laying out shareholding norms for national-level commodity exchanges, the Forward Markets Commission (FMC) said at least 51 per cent of the shares of any commodity exchange will have to be held by the public. This is to ensure broader participation in commodity bourses. Only a commodity exchange, stock exchange, depository, bank, insurance company or public financial institution can hold up to 15 per cent in such an exchange.

The commodity markets regulator said that an entity declared unfit to run an exchange cannot hold any stake in it. Jignesh Shah-led firm will have to divest its entire stake as per new norms. Until the shares are divested, the voting rights of such entities should be withdrawn and any corporate benefit in lieu of such holding should be kept in abeyance or withheld by the exchange, the FMC said.

As per the norms, any shareholding in excess of the specified norms will have to be lowered to the threshold level within five years. The previous guidelines had allowed promoters/anchor investors to hold up to 26% stake in a bourse.

Foreign investors will not be allowed to hold more than a 5 per cent stake. The combined holdings of people resident outside the country have been restricted at 49 per cent.

No foreign institutional investor can have any representation on the governing board of a commodity exchange, the regulator said. The revised shareholding norms come into force immediately and are aimed at better and more effective regulation. They come in the wake of the Rs 5,600-crore payment crisis at the National Spot Exchange (NSEL) last year. The regulator said a commodity exchange needs to have a net worth of at least Rs 100 crore at all times.

“Since commodity derivative exchanges are financial market infrastructure institutions having an important regulatory role, there is a need to diversify their ownership structure and attract more institutional investors. Therefore, there is a need to revise the earlier guidelines,” FMC said.

The FMC directed all six commodity exchanges — Multi Commodity Exchange of India, National Commodity & Derivatives Exchange, National Multi Commodity Exchange of India, Indian Commodity Exchange, ACE Derivatives and Commodity Exchange and Universal Commodity Exchange to amend their rules, including their memoranda and articles of association, to incorporate the revised norms within 45 days of receiving the directions.

Turnover at commodity exchanges fell to Rs 101.44 lakh crore in 2013-14 from Rs 170.46 lakh crore in the previous year, affected by the imposition of a transaction tax and the NSEL crisis.

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