NSE may get more time to dilute NCDEX stake

The National Stock Exchange is likely to get a three-month extension for diluting its stake in National Commodity and Derivatives Exchange (NCDEX) from 11 per cent to 5 per cent in line with ownership norms of the Forward Markets Regulator (FMC).

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While the deadline for stake dilution ended on March 31, NSE had sought six months’ time from the ministry of food and consumer affairs since it was not under the purview of commodity market regulator — FMC.

The Consumer Affairs Ministry had sought FMC’s views on the matter following which the regulator sent its views last week. The FMC is of the view that NSE should not be given an extension since the ownership norms were issued in 2009. It got extended for one more year in 2010. “It had enough time for stake dilution. After all it is only six per cent. However since we can only facilitate an exercise, according to the requirement, three months time may be given,” official sources said.

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NSE in its representation mentioned that the exchange shares are illiquid and, thus, exit path is not easy. It is also looking at foreign partners, either through foreign direct investment or foreign institutional investor and in these cases it also requires time for approval from the Foreign Investment Promotion Board (FIPB), government body to approve foreign investment. NSE, however, did not respond to an email query.

A decision on the same may be taken by next week, sources said. Under the ownership guidelines for national commodity bourses which have completed five-year term, a stock exchange cannot hold more than 5 per cent stake in a commodity bourse (NCDEX in this case).

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The Consumer Affairs Ministry frames policy for the commodity futures market and the regulator oversees the functioning of 23 commodity exchanges in the country including three national exchanges.

FMC had earlier said it will not give extension to any bourses and pointed out the stock exchange will lose its voting right on the extra stake, according to the Company Law.

NCDEX has complied with all other norms except the reduction of stake by NSE, he had said. During the end of March 2011, its anchor Investor Jaypee Capital services surrendered the membership of its firm and all its related entities to trade on NCDEX inorder to remove a potential conflict of interest, said official sources.