NMCE: The rise, fall and survival of India’s oldest commodity exchange
1.In September 2018, the nation’s oldest commodity exchange National Multi-Commodity Exchange of India Ltd (NMCE) is merged with the India Commodity Exchange Limited (ICEX).
2. A commodity exchange is an exchange where various commodities, derivative products, agriculture products and other raw materials are traded.
3. These exchanges usually trade futures contracts in commodities.
- Future contracts– is a forward contract, a legal agreement to buy or sell something at a predetermined price at a specified time in the future
Examples of commodity exchanges in India
4. The commodity exchanges in India includes- National Spot Exchange Limited (NSEL), India Commodity Exchange Limited (ICEX), Multi Commodity Exchange of India (MCX), National Multi-Commodity Exchange of India Ltd (NMCE), National Commodity and Derivatives Exchange Limited (NCDEX), etc.
Regulation of commodity exchanges
5. The commodity market in India is regulated by SEBI since September 2015.
6. Prior to that Forward Market Commission under Ministry of Consumer Affairs regulated Commodities market in India.
7. NMCE merger with ICEX is seen as a win-win strategy.
8. This merger addresses two things: a) net worth requirement and b) requirement of setting up a clearing corporation.
9. ICEX which has already launched world’s first diamond futures and steel futures will now get agri-commodity futures after merging with NMCE.
Benefits of merger
- Market participation will go up
- Liquidity will improve
- Number of long-term future contracts will increase
- Reduction in operational expenses