Reliance Money begins trials for country’s third spot exchange
Mumbai: Local brokerage Reliance Money Ltd has started trial runs of its commodity spot exchange as it chases a mid-May timeline.
“Trial runs are on for both agricultural and non-agricultural products. We should launch operations in about a month," said Sudip Bandyopadhayay, chief executive officer of Reliance Money, a wholly owned subsidiary of Anil Ambani-controlled financial services company Reliance Capital Ltd. Bandyopadhayay has a 50-member team running mock trades with a focus group in Punjab for non-farm goods and in the agricultural mandi (wholesale market) at Vashi, a Mumbai suburb. The venture has seen delays, which the top executive attributed to some government approvals taking longer than expected.
After it launches, the exchange will be the third such in the country for both commodities. The other two are Multi Commodity Exchange of India Ltd-promoted National Spot Exchange Ltd and NCDEX Spot Exchange Ltd promoted by National Commodity and Derivatives Exchange Ltd.
“A commodity spot exchange will have to overcome a host of micro-level concerns such as an extensive countrywide chain of warehouses along with effective monitoring inside these godowns as it will determine their ability to deliver," said a sector analyst with a Mumbai-based research and brokerage firm, who declined to be identified. “Then there are macro concerns such as obtaining clearances from states. Lastly, one will have to see what a third spot exchange can offer over and above the two existing exchanges."
Bandyopadhyay, however, maintains there is enough space for a new entrant to grow and specialize. “There is place for everyone. If some exchange is doing well in, say, pepper, we’ll go to jeera(cumin). It has 17 different grades that are traded," he pointed out.
The spot exchange will need clearances to trade in each state that it wants a presence in. The Agriculture Produce Marketing Committee (APMC) Act prohibits transactions outside the mandis and restricts trading to members. There are hundreds of mandis across the country—some specializing down to the level of specific grades of a commodity. A national spot exchange, therefore, needs approval from each state that it wants to trade in.
“We will start with the non-APMC products, otherwise we will be unnecessarily delayed," said Bandyopadhyay, who estimates that 40% of farm commodities are outside the purview of the APMC. “We will be looking at products such as sugar, tea, cashew and cloves in the agriculture side and steel, copper, steel scrap on the industrial products front."
So far, it has only secured trading approvals in Rajasthan and Gujarat, but will need it in important markets such as Uttar Pradesh, Maharashtra, Karnataka, West Bengal, Punjab and Haryana to be nationally relevant for APMC products.
In January this year, Reliance Money had formed an equal stake joint venture with Singapore-based warehousing and handling company CWT Commodities Pte Ltd for supply-chain management, particularly for perishable commodities. The firm plans to set up 20-odd exchange centres in its first year in places such as Ludhiana, Unjha (in Gujarat), Mumbai, Delhi, Kolkata, Chennai, Kochi, and Chikmagalur and Kushalnagar (both in Karnataka), among others.