MCX files draft prospectus for initial public offering with Sebi

MCX files draft prospectus for initial public offering with Sebi
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First Published: Tue, Feb 19 2008. 01 18 AM IST
Updated: Tue, Feb 19 2008. 01 18 AM IST
Mumbai: The largest commodity exchange in India, Multi Commodity Exchange of India Ltd (MCX), filed a draft prospectus for its initial public offering (IPO) with stock market regulator Securities and Exchange Board of India (Sebi) on Monday.
In a stock market filing, Financial Technologies India Ltd, MCX’s parent firm, said it had filed a draft red herring prospectus, or DRHP, with Sebi for an initial share sale by the exchange.
The filing comes in the wake of an ad campaign, the exchange’s first ever, that was launched early this month as part of an effort to increase awareness of commodities trading among consumers in the run-up to the IPO.
The advertisement, which tells consumers that they can insure themselves against fluctuating commodity prices by operating in MCX’s futures market was created by Lintas India Pvt. Ltd.
“The objective of this ad campaign is to create a phase of fresh thinking…about the commodities industry. To educate them (consumers) about the economic utility of this market and the opportunities available,” says Joseph Massey, deputy managing director, Multi Commodity Exchange of India Ltd. MCX currently accounts for 75-80% of all commodity futures trading in the country.
At the core of the MCX ad seems to be the desire to communicate to investors that commodities trading isn’t about speculation, says one expert. That’s important because only one-third of the trades on MCX result in a net open interest.
Usually, a futures or options contract on a commodity is balanced by an opposite futures or options contract. The number of contracts that aren’t balanced thus is called open interest.
The focus of the ad is “on hedging your risk, rather than speculation. So it does seem like the exchange is trying to attract more hedgers such as farmers, trading houses, importers, exporters,” says Kishore Narne, vice-president, commodity research, Anand Rathi Securities Pvt Ltd.
The ad that is currently being aired tells consumers that they can insure themselves against rising prices of commodities such as steel by playing the futures market at MCX. “To most people, the word futures is as good as rocket science,” says Massey. “So we picked the term insurance, to communicate that the product was akin to insurance and could be used for risk management,” he adds.
MCX plans to carry the campaign through with so-called below-the-line efforts at key retail outlets, information pamphlets featuring FAQs or frequently asked questions in multiple languages, and a short messaging service campaign on phone networks of Bharat Sanchar Nigam Ltd or BSNL, a state-owned telco which has a strong presence in rural India.
PTI contributed to this story
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First Published: Tue, Feb 19 2008. 01 18 AM IST