By Matthew Leising, Bloomberg
New York: The Intercontinental Exchange Inc., owner of Europe’s largest energy market, has agreed to buy an 8% equity stake in India’s National Commodities and Derivatives Exchange Ltd (NCDEX), the country’s second-largest commodity bourse.
“A deal will be announced after regulatory approval,” Narendra Gupta, the chief business officer of NCDEX, said on 14 March at a conference, but did not disclose a price.
Atlanta-based Intercontinental said in its annual filing it had acquired an 8% stake in a foreign company for $36.3 million. It did not name the company in the 26 February filing with the Securities and Exchange Commission.
Intercontinental rival, the New York Mercantile Exchange, is also in talks to buy a stake in an Indian bourse, the Multi Commodity Exchange of India Ltd (MCX), according to a report in a leading Indian newspaper. Both exchanges are eyeing overseas investments to help fuel growth as their revenue from the US and Europe moderate.
“Whoever gets into these faster-growing markets first will have a beachhead” to enable growth, said Mark Williams, professor of finance, Boston University, who follows exchanges. “It’s a clear trend.”
Intercontinental spokeswoman Kelly Loeffler did not immediately return a call for comment.
The Mumbai-based MCX wants an investor to join Fidelity International Ltd as a shareholder once the government relaxes investment restrictions, managing director Jignesh Shah said in a January interview.
Net income at Intercontinental will grow 66% this year and 49% in 2008, according to Bloomberg data. Profit at Nymex will grow 60% this year and 30% in 2008.
Indian exchanges are seeing volume growth fueled by increased demand for raw materials. The country’s 24 commodity exchanges traded $619 billion worth of products between April and December of last year, surpassing the $490 billion worth of goods traded in the twelve months ending March. 31, 2006, according to Indian government statistics.
Share of Trading
The Multi Commodity Exchange accounted for 59 percent of the total trading in India in 2006, and the National Commodities exchange had a 34 percent market share, according to the government.
“Nymex is considering a number of international partnerships, but we can’t comment on specific locations,” said Nymex spokeswoman Anu Ahluwalia. She said Nymex is also looking in Europe for potential partnerships.
Intercontinental shares rose $2.92, or 2.3%, to close at $131.93 on the New York Stock Exchange. Nymex shares rose 51 cents, or 0.4%, to $127.56.
MCX and NCDEX both trade agricultural products, metals and energy futures, including Brent crude. NCDEX’s shareholders include Goldman Sachs Group Inc., which has a 7% stake, and the National Stock Exchange of India Ltd.
Last year, India had barred overseas firms from investing in its commodity exchanges, and futures trading was largely banned between the 1960s and 2003. The country’s Ministry of Finance is expected to announce a policy soon of how foreign investment can be conducted in the country’s futures exchanges, Gupta said.
“Within two to four weeks the policy announcement should be made,” he said.
In June, Nymex and MCX signed a five-year licensing agreement that allowed the Mumbai exchange to use Nymex settlement prices in the daily trading of its energy contracts. MCX trades a rupee-denominated light sweet crude oil contract that is one-tenth the size of a Nymex contract.
NCDEX currently lists Intercontinental’s ICE Futures exchange’s contract for Brent.