National Stock Exchange (NSE) and the National Commodity and Derivatives Exchange (NCDEX) have started preliminary talks on a possible merger.
NCDEX, which is losing money, is looking at the merger option to remain with the exchange.
At present, NSE has 15 percent stake in NCDEX, which focuses on agri commodities.
While the merger talks are on, the two sides differ on valuation.
"While NCDEX is quoting higher valuation, around Rs 1,000 crore, NSE does not want to give more than Rs 600 crore for the agri commodity exchange," a source told Moneycontrol.
Another source, who was managing director of a commodity exchange, told Moneycontrol: "Even the regulator and finance ministry had told NSE, which was in discussions with Multi Commodity Exchange for a merger in 2017, to bring NCDEX into its fold. Especially since NSE already has maximum shareholding of 15 percent and a board seat in NCDEX."
In the recent past, NCDEX sees daily volume of Rs 1,200-1,500 crore, which is very low.
"We don't want to take risk of shutting down agri-based commodity exchange but with this volume, NCDEX can't sustain for longer period of time," a source in the ministry told Moneycontrol.
After the castor seed fall out, many brokers have stopped trading on NCDEX which also hamper the business of exchange.
"NCDEX is really doing work for which commodity derivative market had started. And even in the competition, NCDEX has own unique selling point which has to be saved," a market expert told Moneycontrol.
NCDEX did not respond to Moneycontrol's queries while NSE said: "We don't comment on market rumors or speculation."
Another source who works closely with the regulator told Moneycontrol: "NSE should take this opportunity and merged this entity with them. They have also commodity arm so they can use the expertise of NCDEX which primarily deals in Agri commodity. However, the regulator should ensure that the objective of NCDEX should intact even after the merger with NSE then only we can imagine a robust commodity market."
In 2017, Multi Commodity Exchange was in discussion with Bombay Stock and National Stock Exchange for the merger. After refusal from BSE due to high valuation NSE showed interest in MCX. But, SEBI was not comfortable with this merger. At that time also, market experts raised concerns that NSE should take care of NCDEX first where they are promoters and largest shareholders.
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