Two Indian exchanges -- Anil Dhirubhai Ambani Group-promoted Indian Commodity Exchange (ICEX) and Metropolitan Stock Exchange (MSE) – are in initial talks for a merger, sources told Moneycontrol.
MSE does not have much of a product list. It has only one active currency product and was struggling to raise capital to comply with the market regulator’s net worth criteria for an exchange and clearing corporation. However, it raised around Rs 200 crore in 2017 to fund its current operations, thus meeting the regulatory criteria.
The Securities and Exchange Board of India, which did not allow the exchange to launch new products till this requirement is fulfilled, has now given it the go ahead.
On the other hand, ICEX has small product list and is active in the commodity segment. However, the exchange continues to lose money due to its smaller product kitty. It has three active contracts in diamond, steel and rubber but the duo do not earn the exchange much profit. It plans to launch petrol and diesel contracts was rejected by SEBI. The exchange’s operating cost is around Rs 1-2 crore per month at present.
Last year, Ahmedabad-based National Multi-Commodity Exchange (NMCE) merged with ICEX.
Recently, ICEX received SEBI’s approval for using the MSE’s clearing corporation subsidiary -- Metropolitan Clearing Corporation of India. To complicate matters for MSE, the regulator has ordered a forensic audit of the exchange.
Refuting talks of the merger, an ICEX spokesperson said, "ICEX is on a growth trajectory with a very strong financial foundation. Our net worth is well above the mandated criteria. After the merger with erstwhile NMCE, our net worth has increased substantially to sustain the business on its own.
“The exchange has witnessed a year-on-year volume growth of 10 times in diamond contracts. In the last few months, we have launched new contracts in steel, isabgol (also known as psyllium husk and is a commonly used Indian home remedy for treating constipation, diarrhoea and symptoms of anal fissures) and rubber. We have already announced plans to launch black pepper contracts in May and paddy futures in a couple of months. Hence, there is no plan for a merger with any other exchange as of now."
An MSE spokesperson too denied any merger talks with ICEX, saying: "There is no inclination or any such agenda from MSE and we completely deny any progress on the said matter."
But three officials from the industry confirmed the talks between the two exchanges.
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