Commodity futures exchange investment limit may be set soon

Commodity futures exchange investment limit may be set soon

New Delhi: India may allow overseas companies to invest in commodity futures exchanges by the end of the year, lifting a ban that has kept investors such as the New York-based Nymex Holdings Inc. from participating in the country’s $900 billion (Rs35.82 trillion) market.

The Union government may cap ownership at 5% for a single investor, said B.C. Khatua, chairman of the Mumbai-based Forward Markets Commission, mirroring rules set for stock exchanges. The agency regulates India’s 24 commodity bourses.

“We don’t want an investor to work only with a motivation to make profit and drive the market," he said in an interview in Goa on 22 September. “Otherwise, the whole purpose of providing transparency through the exchanges will not be met."

The limit may force Goldman Sachs Group Inc. and Fidelity International Ltd to pare their stakes in the nation’s biggest commodity bourses.

Exchanges worldwide have announced more than $64 billion in purchases and ventures since 2005 as they boost electronic trading and reduce costs.

Goldman Sachs bought 7% holding in National Commodities & Derivatives Exchange Ltd last year and Fidelity acquired a 9% stake in Multi Commodity Exchange of India Ltd to gain from a surge in trading in the fastest growing economy after China. There was no cap when the two overseas companies bought stakes. Goldman Sachs and the NYSE Group Inc. in January led a group that bought 20% of India’s National Stock Exchange.

Deutsche Boerse Group and the Singapore Exchange Ltd bought 5% each in the Bombay Stock Exchange Ltd—Asia’s oldest. The bourse cut the holding of brokers to 49% by selling stakes to 19 investors in May.