Mumbai: Indian commodity brokerages are setting up derivatives trading subsidiaries in Dubai, the Gulf Arab trade and tourism hub with huge Indian expatriate presence, traders and officials said.
In the past eight months 16 commodity firms have received Indian commodity futures regulator Forward Markets Commission’s (FMC) no-objection certificates to open subsidiaries abroad.
“Number of brokerages seeking permission to open subsidiaries abroad have suddenly gained momentum. Most of these brokerages have opened subsidiaries to trade on Dubai Gold and Commodities Exchange (DGCX),” said an FMC official, who did not want to be identified.
The Union ministry of overseas Indian affairs estimates 4.3 million non-resident Indians (NRIs) stay in the Gulf region, with another 0.3 million in the north African countries ringing Dubai.
Gaining momentum: 16 firms have been granted no-objection certificates from the Forward Markets Commission to open subsidiaries abroad.
In February, Kunvarji Commodities Brokers Pvt. Ltd received FMC and Reserve Bank of India approvals to set up subsidiaries abroad. It set up its first subsidiary in Dubai. “We hope to go live in a month. Our target customers are the NRIs who want to hedge their risks through commodity trading,”Atul Choksi, company director told Reuters.
Indian brokerage subsidiaries are registered with the Emirates Securities and Commodities Authority and function independent of their parent companies.
Karvy Comtrade Ltd, Asit C Mehta Commodity ServicesPvt. Ltd, Dynamic Commodities Pvt. Ltd and India Infoline Commodities Pvt. Ltd have already set up subsidiaries in Dubai.
The commodity exchange, DGCX has designed tailor-made contracts for the expatriate Indian business community. It will start the world’s first delivery-based rupee-dollar futures contract on 7 June.
“Indian businessmen with exposure in both dollar and rupee can use the contract to hedge against rupee-dollar fluctuations,” said V. Sivaramakrishnan, executive director, KomBench DMCC, a Dubai-based subsidiary of an Indian commodity brokerage. “Small Indian companies have shown a lot of interest in the contract.”
“DGCX has emerged as a favourite exchange for Indian brokerages as it bridges the time gap between the western and the eastern time zones, giving more business opportunities,” said Pradeep Unni, vice president, research, Vision Commodities Services DMCC.