MCX IPO Update by the Research desk of FAMS Advisors Pvt Ltd

Feb. 22, 2012 - PRLog -- Mumbai, Maharashtra, February 22, 2012 /India PRwire/ -- The IPO of MCX has opened today. FAMS Advisors shares their IPO report as under:

Multi Commodity Exchange of India Ltd (MCX)

Issue Price : Rs. 860 - Rs 1,032/-
Issue Size (Rs) : Rs. 552.75 - Rs. 663.31 crores

Shares on offer : 64,27,378 shares

Issue opens-closes : 22nd to 24th February 2012
Listing : BSE ONLY


Background

MCX is a leading commodity futures exchange offering trading in 49 commodity futures contracts as on December 31, 2011. The futures contracts help hedging and asset allocation and portfolio diversification.

MCX has over 2,150+ registered members and over 2,96,000 terminals spread over 1,572 cities in India.

MCX includes trading of most commodities except Livestock on its exchange platform. These commodities include copper, Gold, Silver, Platinum, Crude Oil, Aviation Turbine Fuel, Natural Gas, Thermal Coal, Heating Oil, Gasoline, Brent Crude Oil, Copper, Tin, Nikel, Aluminium, Zinc, Lead, Cotton, Crude Palm Oil, Refined Soy Oil, Soya Bean, Chana Dal, Cardamom, Coriander, Rubber, Wheat, Maize, Barely, Guar Seed, Carbon Credits, Almond, Mentha Oil, Potato, Sugar and Iron Ore.

MCX is the largest silver contracts traded exchange, 2nd largest gold, copper and natural gas contracts traded exchange and the 3rd largest crude oil contracts traded exchange in terms of number of commodity futures contracts traded for the calendar year 2010 and 6 months ending 30th June 2011. On an overall basis, MCX is ranked 5th largest commodity futures exchange (includes MCX-SX volumes) globally according to the Futures Industry Association (FIA).

There are currently 21 commodity exchanges and associations which are recognised by the Government of India, recognised by FMC in India and authorised to organise and regulate futures trading in offering trading in over 60 commodity futures with the approval of FMC.

Of these exchanges, 16 are local / regional in nature and are spread across India. Most of these regional exchanges practice the traditional open-outcry system. Some of these regional exchanges trade in just a few commodities.

However the other five exchanges namely MCX, NCDEX, NMCE, ICEX and ACE are multi commodity national entities offering electronic trading in numerous commodity futures contracts. Four of these, excluding ACE, accounted for 98.8% of the commodity futures contracts turnover in India during the fiscal 2010.

The five, including ACE, accounted for 99.4% (FY2011) and 99.7% (9MFY2012) of the turnover of commodity futures contracts traded in India. Commodity futures trading in India have grown over 90 times from 2004 till 2011 in terms of volumes traded. Commodity futures trading volumes have risen at a compound annual growth rate of 90.9% between fiscal 2004 and fiscal 2011.

Projected Future Growth Drivers of the Industry

   Indian Economic Growth

India's GDP is currently in the top 5 global growth drivers. Commodities futures trading volumes are expected to increase as there is a relation, mostly seen in developed countries, between physical quantity of commodities consumed and that of the commodity volumes on the exchanges.

   Commodity Options to be introduced

The Futures Industry Association, FIA, estimates on options trading suggest that options trading constitue 50.8% of the total commodities derivatives volumes globally for the six months period ended June 30, 2011. If the Government of India introduces options trading in commodities, planning process ongoing, then this would lead to increased volumes and invite further participation which would further lead to the overall growth of the Indian commodity derivatives markets.

   Introduction of innovative new commodities

There could be possibility of newer innovative commodities which could be allowed on the commodities exchanges to be traded, which would lead to newer contracts and further enhance volumes.

   Deepen Investor Participation

As the commodities exchanges become more accessible and many more investors become informed on how to trade the commodities, more participants are expected to trade in commodities. The newer participants could include individual investors who look to diversify their investment portfolio over various asset classes, commodity manufacturers and oil refiners who are looking to hedge their price volatility risks.

The Government of India could adjust the regulations so as to allow banks, mutual funds and foreign institutional investors to participate in the Indian Commodities markets to bring liquidity and depth in its functioning and overall participation.

MCX's Investments

   Dubai Gold and Commodities Exchange DMCC

MCX, 5% equity shareholder, entered a Joint Venture MOU with Financial Technologies (India) Limited and the Dubai Metals and Commodities Centre (now known as Dubai Multi Commodity Centre) to establish the DGCX. DGCX commenced operations with gold futures trading in November 2005; by end of FY2006 introduced silver futures and by Q1FY2007 added currency futures trading.

   MCX Stock Exchange Limited ("MCX-SX")

MCX and its promoter group, Financial Technologies (India) Ltd (FTIL) promoted the MCX-SX in 2008. Currently FTIL is a non-controlling shareholder and MCX has a 5% equity stake in the entity. MCX-SX is a SEBI recognised stock exchange, currently having approval for currency futures trading.

   MCX-SX Clearing Corporation Limited ("MCX-SX CCL")

MCX-SX CCL is a Clearing and settlement entity, only the second to be granted permission by SEBI, of the MCX-SX. MCX-SX CCL is capable to undertake clearing and settlement of trades in multi-asset securities. MCX has a direct stake of 26.0% in MCX-SX CCL.

   Multi Commodity Exchange Clearing Corporation Limited ("MCX CCL")

MCX CCL, a 100.0% subsidiary, was established as a separate clearing house to undertake clearing and settlement of trades and to provide for the provision of counterparty risk guarantee on our Exchange. MCX CCL has not commenced operations as it is awaiting the approval of FMC.

   SME Exchange of India Limited ("SME")

SME, a 51% subsidiary, was incorporated to operate as a stock exchange for small and medium scale enterprises who wish to list their equity shares and eventually have their derivatives. FMC approval is received.

To read the remaining report with graphical representations, you may visit http://famsapl.com/updates

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