Indian Commodity Exchange Limited (ICEX)
ICEX’s business
(i) Indian Commodity Exchange Ltd. (“ICEX”), a recognized commodity exchange with demutualized corporate structure, online trading, clearing, and settlement using best practices, is governed by the Securities and Exchange Board of India (“SEBI“). The only Primary Reportable business segment for the company is “business of facilitating trading in commodities and incidental activities thereto,” as it only operates in one reportable business segment, “Commodity Exchange,” and one reportable geographical segment, which is within India.
(ii) On August 28, 2017, the Exchange launched the 1 carat Diamond Derivative contract in order to restart trading operations again, after approval from SEBI. The Diamond Derivative contract was first introduced by ICEX, the first exchange in the world. On August 28, 2018, the Exchange introduced the Steel Long contract, precisely one year after the trading operations were resumed.
(iii) On August 27, 2018, and August 31, 2018, the Hon’ble National Company Law Tribunal (“NCLT“) approved the merger of National Multi-Commodity Exchange of India Limited (“NMCE“) with ICEX through a common order. The merger became operative on September 7, 2018. The plan called for April 1st, 2017 as the scheduled date. NMCE and ICEX merged as a result during the year. By operation of law, the commodities traded on the former NMCE were immediately exchanged on the ICEX platform. There are currently sixteen distinct commodity derivatives contracts listed on the exchange’s platform for trading.
(iv) The Paddy Basmati derivative contract was also introduced on July 11, 2019. The Exchange intends to maintain its reputation as a creative Exchange by occasionally introducing novel contracts.
(v) By entering into a Clearing and Settlement agreement with Metropolitan Clearing Corporation of India Limited (“MCCIL“), the Exchange has outsourced its services related to clearing, settlement, deliveries, and risk management to MCCIL with effect from October 1, 2018, in accordance with SEBI regulations and the previous SECC Regulations, 2012.
(vi) The Exchange has effectively set up its technology and infrastructure with the help of its seasoned management team. ICEX has partnered with Millennium IT, a top technology supplier and a subsidiary of the London Stock Exchange Group, whose technologies are utilized by exchange companies globally. In order to take advantage of price discovery, risk management, and supply chain management in the commodity markets, farmers, traders, and actual users are encouraged to participate in the Exchange, which is in a prime position to capitalize on the market’s enormous potential.
Initiative by SEBI to Promote Commodity Business
(i) SEBI has recently implemented a number of initiatives to strengthen the commodity derivative market. In a significant move to fortify the commodities market, SEBI allowed mutual funds to trade alongside PMS in commodity futures. It made participation in the Agri and Non-Agri commodities derivatives segments (CDS) possible for mutual funds and portfolio managers. Prior to this, commodities futures trading was permitted for Alternative Investment Funds (AIFs).
(ii) Prominent regulations efforts include permitting commodity options, permitting foreign companies to use Indian commodity markets to hedge their exposure to commodities, and permitting the trading of commodity indexes.
(iii) The SEBI approved the operation of two additional exchanges to run commodities derivative markets for the 2018–19 fiscal year. As a result, ICEX is one of the five national electronic multi-commodity exchanges that SEBI has recognised to date.
(iv) ICEX will begin this segment during the current fiscal year after SEBI gave ICEX permission to begin Mutual Fund distribution using the Exchange’s infrastructure.
Performance Highlights for FY19–20:
1. Compared to FY 2018–19, operating income for FY 2019–20 is ₹ 3.23 crore, up from ₹ 1.90 crore.
2. Compared to ₹ 28.57 Crore for the year ended March 31, 2019, the net loss after taxes for the year ended March 31, 2020, was ₹ 42.32 crore.
3. The total net worth was ₹129.37 crores as of March 31, 2020.
4. The Company introduced the Paddy Basmati Futures Contract on July 11, 2019, which represents another significant achievement for FY19–20. The first structured, open, and regulated diamond derivatives market in the world has been established by ICEX.
5. During the 2019–20 fiscal year, ICEX Company planned and launched a business in the Mutual Fund Distribution Scheme and its associated activities.
6. With 7098 clients trading on the Exchange, the average daily turnover for FY 19–20 was ₹ 156.41 crores, compared to ₹ 93.62 crores for FY 2018–19 (single side).
7. Compared to ₹ 24000 crores in F.Y. 2018–19, the total turnover of commodity futures traded on the ICEX Exchange for F.Y. 19–20 was ₹ 40511 crores.
8. As of March 31, 2020, ICEX had 138 SEBI registered members, 1298 Authorized Persons, and 3340 terminals—including Computer to Computer Link (CTCL)—operating in 329 Indian cities and towns, giving it a nationwide reach.
Significant Developments on ICEX (13.05.2022)
Since Commodity’s net worth has dropped below the required 100 crores to operate an exchange, SEBI has revoked its ICEX license.
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