New Delhi: A turnover of a staggering Rs 175 lakh crore  --  that is what commodity exchanges are set to achieve in 2011 with glittering contributions from bullion, primarily gold and silver.

The year has been a marvellous one for commodity bourses, trading on which was re-introduced in April 2003, with turnover in the commodity futures market rising every month, thanks to rising gold prices which went from Rs 20,700 per 10 grams, to over Rs 29,000 during the course of 2011.

"The overall turnover of commodity exchanges is expected to reach Rs 175 lakh crore by the end of 2011," a senior official of the commodity markets regulator Forward Markets Commission (FMC) said.

A turnover of Rs 175 lakh crore, is a jump of 67 percent from a little over 104,00,000 crore last year.

The official attributed the rise in turnover of the 23 commodity exchanges in the country, including five national bourses, to growing demand for commodities like gold and silver.

Till November, the combined turnover of the five national and 18 regional commodity exchanges stood at over Rs 1,58,74,642 crore.

MCX, the country's leading commodity exchange, had maximum market share, followed by NCDEX, ICEX, NMCE and ACE. Not just that the business of exchanges grew manifold, but
investors in commodities too reaped rich dividend, in fact more than what could from equities.

Analysts and commodity brokers said bullion was considered a safe haven, especially amid weakening stock market and slowdown in global economy.

"This year, the returns from gold was 30 percent, while equities gave negative returns," SMC Comtrade Chairman and Managing Director D K Aggarwal said.

Similarly, the return from silver and agri-commodities like guarseed and mentha oil was more than 20 percent so far. FMC Chairman B C Khatua bidding adieu was another event
that marked the year for commodities. Khatua was instrumental in many market-related changes and working of the Forward Contracts Regulation Act Amendment (FCRA) Bill.

There was no replacement to Khatua at FMC, but the regulatory system continued to function under the acting Chairman Ramesh Abhishek.

With delay in ratification of the FCRA Bill, the market regulator lacked teeth to take action against national exchanges for not complying with norms on capital restructuring.

FMC had announced guidelines in July 2010 directing the three national exchanges MCX, NCDEX and NMCE (that have completed five years of operations) to raise their capital
base to Rs 50 crore and anchor investors to reduce stake in the exchange to 26 percent.


They have not yet complied with the norms completely despite repeated extensions.

The year was also significant from the perspective of investors in the commodity market, with the regulator getting tough on exchanges and brokers to ensure transparency and
better governance.

The FMC held training programmes for police forces across states where illegal futures trading had proliferated. It also took timely measures against speculative trade by increasing margins especially in guarseed, mentha oil, chana among others.

Besides, the regulator increased the trading limit in most commodities, thus boosting participation of hedgers this year.

For better governance, not only did the regulator introduced an uniform 'Know Your Client' forms but it also reformed auditing of brokers for a one exchange at a time. Earlier, auditing was done for all exchanges at same time.

The year also saw strong opposition from the exchanges against the government's move to impose stamp duty of 0.003 percent on derivatives including commodities.

The year was though bullish for investors in commodities, but lacked depth in the absence of new products like options, which may see light in the next year if the FCRA bill gets Parliament nod.

The FCRA bill aims to give autonomous power to FMC in the lines of capital market regulator SEBI and will also pave way for introduction of new trading instruments in commodities futures market.

(Agencies)