Commodities market regulator Forward Markets Commission (FMC) on Tuesday issued new ownership and shareholding norms for commodity exchanges under which at least 51 per cent of their paid-up equity share capital will have to be held by the public.
The revised shareholding norms, which come into force immediately, are aimed at better and more effective regulation and come in the wake of the Rs 5,600-crore payment crisis at the National Spot Exchange (NSEl) last year.
Promoters with a higher shareholding will have to comply with the new norms and bring down their stakes within three years, the regulator added. According to the new guidelines, at least 51 per cent of the paid-up equity capital of a recognised commodity exchange will have to be held by the public. No individual promoter can hold more than 5 per cent in any commodity exchange, unlike the earlier norms where they were allowed to hold up to 26 per cent, FMC said in a circular.
Only an already-existing commodity exchange, a depository, a commercial bank, an insurance company and a public financial institution is allowed to hold up to 15 per cent in a commodity exchange.
Even foreign investors are not allowed to hold more than 5 per cent. The combined holdings of people resident outside the country have been restricted at 49 per cent. No foreign institutional investor can have any representation on the governing board of a commodity exchange, the regulator said in the revised rules.
The regulator also said a commodity exchange needs to have a net worth of at least Rs 100 crore at a time.The FMC directed all multi-commodity exchanges to amendtheir rules, including their memoranda and articles of association, to incorporate the revised norms regarding shareholding, ownership, net worth, and fit and proper criteria, among others, within 45 days from the date of receipt of these directions.
Compliance in this regard should be reported to the commission by June 23. Since commodity derivative exchanges are financial market infrastructure institutions having an important regulatory role, there is a need to diversify their ownership structure and attract more institutional investors. Therefore, there is a need to revise the earlier guidelines, the circular said.