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Department of Consumer
Ministry of Consumers Affairs, Food and Public Distribution
Government of India
New Delhi
Guidelines on the Equity Structure of the
Nati onwide Multi Commodity Exchanges after five ye'!rs of operatts>..!l
F. No. 121112007-IT Dated 29
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" Jl.iBy 2009
The Commodity Futures Deri vative markets were opened up in 2002 and
have witnessed very rap:d groNth thereafter Th cornrrodity exchanges have
played a key role in their axpansion. The (3()vemnl:nt recognized a1d licenced three
Nationwkie Multi Commodity Exchangss (NMCEs)- MCX, NCDEX and NMCE- \-vho
have completed five years of their operations in the commodity denvatives rnari<et
(COM). The Forward Markets Commission has been issuing, from time to time
guidBiines and directions aimed at better governance, transparency and investor
confidence in tt1e COM
2. Recently, on May 14,2008, the Government has issUd guidelines for setting
up of a new National Multi Commodity Exchange to further strengthen the ex1sting
infrastructure in CDM. In the said Guidelines, para No. 5.3 r.as set the fra'Tlewo:i< for
shareholding and clause (f) of the said para has provided for the revision of
sharehold1ng of a Nationvvide Multi Commodity Exchange (hereinafter referred to as
"National Commodity Exchange" or "NCE" in short) after the completion of 5 years d
operation in the COM. Therefore. all the National Commodity Exchanges after
completion of 5 years of operations need to align their shareholding pattem with the
shareholding pattern as specified below, within a period of one year failing whicn tile
concerned National E:x:d1ange will be liable to lose its national sta:us. This would
mean that its recognit ion for all commodities notified under section 15 or otherwise
not prohibited under section 17 of the Forward Contracts (Regulation) Act, 1952 WI!
be converted into recognition in specific commodities as may be listed in the
recognition notification and that too for specified period whidl will need to be
renewed from time to time. The said period of one year for a!ignmen1 of shareholding
pattern may be extended by the Forward Markets Commissior in exceptional cases
on genuine grourrls for a period not exceeding one year
(Explanation: "National Commodity Exchange" means a demutuaHsed Commodity
Derivative Exchange with an ildependent professiOI'le
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management, an electronic
trading Platform, all India operations and recognized under section 6 ot' the Forwarc
Contracts (Regulation) Act. 1952 for trading in all commo'dities notified uis 15 or
othefWise not prohitxted for trading ws 17 of the s;aid Act)
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Th:s issue has been under :he considerati on of the Govemment for some
time and it :s now pleased to issue the foll owir.g guidelines in this behalf.
Gl!idelines
3. Government has povvers to issue new guidelines. Guideli nes for conversion
of Regional Exchanges into National Commodity Exchange needs to be spe:t out.
This issue has been under the consideration of the Gol/emmenl for some time back
and after revisiting and reviewing tr,e current ownership structure of the existing
National Commodity Exchanges, the following Guidelines are laid down:
3.1 All National Commodity Exchanges should have a paid up equity capital of
atleast Rs. 50 crore and Networth* of atleast Rs. 100 crore as a going
concern and on a continuous basis.
c Note: Networth is defined in the enclosed Note 1)
3.2 The total shareholding of the class of entities mentioned belcw should not be
less than 26%:
i. Government Companies, as defined in the Companies Act 1 956;
ii. Banks and Public financial institutions;
iii . Government Companies as defined in the Companies Act, 1956,
Cooperative Societies as defined in the Societies Act and Federations
manufacturing or marxeting agri inputs or marketing agri-produce or
owning and operating warehouses; and
iv. Warehousing Companies in the private sector having minimum five
years' standing in war&housing business and owning and operating
warehouses in at least tv.lo states.
However, the total of the Government compar.ies mentioned irl
sub paras (i) and (iii) above shall not be less than 1 0%.
3.3 No s'"lareholder. except the onginal promoters/investors, at the tlme of
recognition as an NCE, either :ndividualiy or together with persons acting in
concert with it, shall hold more than 15% of the paid up equity capita! of the
Exchange. For originai promoters/investors this limit will be the maximum of
26%.
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In case the sharehoiding of each of the original promoterS/Investors including
the Anchor- Investor tal 's below 15%, one of the shareholders including the
new shareholders may be allowed by FMC to act as and to
increase its equi ty shareholding to a maximum of 26%. TI1e shareholding of
Stooo Commodity Exchange (s) will , however, be governed by the conditions
contained in Para 3.4 of these guidelines.
(Explanation: "Anchor-Investor' is an investor wllo plays the read role in
managing the National Commodity Excha:1ge.)
3.4 The shareholdi ng of any single Stock/Commodity ExChange alongv.ith
persons acting in concert shall not be more 1ha.n 15% of the subscribed and
paid up equity capital of the said Exchange. The cumulative shareholding of
such Exchanges in the relevant Nati onal Commodity Exchange shall not be
more than 20%.
3.5 The shareholders of the Exchange shall not have any trading interest either
as a trading member or as a cl ient of the Exchange. The shareholding of a
broker/member of any otiler commodity exchange shall not exceed 1% and
the total of all such brokers/members t aken together shall not
exceed 1 0% of the paid up equity capital. They wirl also not hoid any seat in
the Management/ Board of the Exchange.
3.6 No non-corporate entity, apart from those covered by the preceding para 3.5.
shall hold more than one percent of the paid up equity capital of the
Exchange and t he total of such holdings together with that of those covered
by para 3.5 shali not exceed 25% of the paid up equity capitai of the
Exchange.
3. 7 Allotment of shares to foreign entities must be in confonnity wnh the
provisions of the Press Note no. 2 of 2008 dated March 12, 2008 issued by
the Department ot l r"Jdustrial Pol icy & Promotion, Government of India, subj ect
to any changes therein made by the Government fron time to time.
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3.8 rt is obligatory on all shareholders of the Exchat1ge to align the shareholdi ng
pattern, as per these present guideHnes and guidelines that may be issued by
the Government! Forward Markets Commission from time to tome.
4 The Exchange shall confirm to the Commission in wri ting that the investors in
whose favour the divestment/fresh issue of equity is made. fulfill the criteria for a frt
and proper person' as defined in the enclosed Note 2.
5 All disi nvestments or fresh issue of equity shares of more than 1% shall be
subject to the prior approval of the Forward Markets Commission and before seeking
such approval, the Exchange should ensure that the proposal satisfies the above
requirements.
6. As far as the existing National Commodities Exchanges are concemed, the
last date tor compliance with the above guidelines shall be 30!h September 2010,
which can be extended by the Forward Markets Commission upto 30th September,
2011 in exceptional cases on genuine grounds.
( Brij Mohan I
Director( IT).
Note 1
Networth: The networth for the purposes of these guidelines wi ll be computed
as under:
1. Paid up equity share capital
Add
2. Non-redeemable preference shares capital
3. Share premium paid in cash
4. Reserves and surplus (excluding capital reserve, revaluation reserve,
and such other reserves which have been earmarked for specmc
purposes and are not available for distiibution)
Less
5. Loans and advances except for the ones given for the purposes of
busmess of the Exchange.
6. Investments in non-quoted compankJs for the purposes other than
developing infrastructure for or in the Commodity Sector.
7. Investments in the non-marketable securities.
8. the quoted securiUes in excess of 10% of total equity
fund.
9. Intangible assets acquired for cash for purposes other than the
business of the Exchange.
CRITERION FOR A PERSON TO BE DEEMED TO BE
'_f. FIT AND PERSON'
For the purpcse of these QLJidel ines, a person shall be deemed to be a fii and
proper person if -
(i) such person has a general reputation and record of fC3 imess and integrity
including Dut not !imited to -
(a) financial integrity;
(b) go..'?d reputation and characier; and
(c) honesty
(ii) such person has not incurred any of t he following dis-qualifications -
(a) the person or any of its whole time directors or managing partners
hss been convicted by a Court for any offence invorving moral
luipitude or any economic offence, or any offence against any
laws;
(b) an order for winding up has been passed against th person;
(c) the person or any of its whole time directors or managing partners
has been declared insolvent and has not been discharged;
(d) an order, restraining, or debarring the person, or any of
its whOle time directors or managing partners from dealing in
commodities I securities or from accessing the market has been
passed by any regulatory authority and a period of three )'ears
from the date of the expiry of the period specified in the order has
not elapsed;
(e) an)' other order against the person or any of its whole time
directors or managing partners which has a bearing on the
commodities market, has been passed by any regulatory authorjty
and a period cf three years from the date of the order has not
elapsed;
(r) the person has been found to be of unsound mind by a Court of
competent jurisdiction and the finding is in force; and
(g) the person is financially not sound.
(iii) If any question arises as to whether a person is a fit and proper
person, the decision of the Forward markets Commission in this behalf shal! be finaL