Commodity

Commodity exchange in India plays an important role to organize the prices of any commodity that are fluctuating. Recently Government of India introduced the Online Commodity Exchanges to ensure better risk coverage and delivery of commodities. In India there are number of recognized future exchanges amongst which the prominent ones are the three national level multi-commodity exchanges. These exchanges are under the supervision of Forward Market Commission (FMC) of Government of India. They are:

* National Commodity & Derivatives Exchange Limited (NCDEX)- it is a public limited company, located in Mumbai.

* Multi Commodity Exchange of India Limited (MCX)- it is an independent and de-mutualized exchange with a permanent recognition from Government of India.

* National Multi-Commodity Exchange of India Limited (NMCEIL)- is the first de-mutualized, Electronic Multi-Commodity Exchange in India and it has been granted approval by the Government to organize trading in the edible oil complex.

The Ministry of Commerce & Industry, Department of Industrial Policy & Promotion (DIPP) has issued the policy of foreign investment in commodity exchanges in the Press Note No. 2 (2008) wherein the overall foreign investment in commodity exchanges would be capped at 49%.

The Government of India has proposed that Foreign Institutional Investors (FII) can pick up 23% stake in commodity exchanges but will have no representation on the board of directors, of commodity exchange.

The Foreign Direct Investment (FDI) for commodity exchanges would be limited to 26% therefore, allowing the composite ceiling of foreign investment in commodity exchanges up to 49%.

These guidelines for foreign holdings have been drawn conditional to the norms of the equities markets.

Another layer of safeguard as per the policy is that foreign investors, including persons acting in concert, cannot hold more than 10% of the equity in these companies and no single investor can hold...