By Rutam Vora, Commodity Online
While the commodity market is abuzz with increased investor participation, the business aspect in the Indian commodity exchanges does not look very bright and promising as the participants find the pie getting smaller with increasing number of players.

But all eyes are on the upcoming FCRA amendments, which is believed to change the rules of the game.

Not too far in the history, the Indian commodity futures markets had started professional functioning with electronic platforms in 2002-03. Considering this, the sector is fairly young since its existence.

National Multi Commodity Exchange (NMCE) pioneered the commodity exchanges business in India but Multi Commodity Exchange (MCX) outperformed in the game and cashed on its strong technological background, which earned the bourse the title of the front runner bourse with largest trading memberships in the country.

However, unlike currency market, which has lesser acceptance among investor community in India, commodity markets are gathering momentum with increased participation not only from the large investors or institutions, but also from retail investors.

MCX has successfully managed to cash on the rising participation of commodity traders and investors as the bourse makes the scrumptious profits of Rs.220.6 crore.

At a time, when the industry is growing and very few players being in the fray, more investors get attracted towards the expanding sector.

India has five national bourses operational, MCX, National Commodities and Derivatives Exchange (NCDEX), Indian Commodity Exchange (ICEX) and NMCE, while the latest addition is the Kotak group-promoted ACE Derivatives & Commodity Exchange with an approximate daily volumes of Rs.33,000 crore.

However, the current volumes are very meager in the commodities markets against that in the equities segment. But industry experts are of the opinion that the volumes in commodities segment have a potential to surpass equities markets in some time.

The robust economic outlook for the commodities market comes on the basis of the government pushing forward the much awaited amendment to the Forward Contracts (Regulation) Act (FCRA) has created conducive atmosphere for those willing to get into commodity exchange business.

In the waiting are some of the big-wigs of the industrial arena in the country. Regional bourse National Board of Trade (NBOT) is in the process of demutualization; while IT professional Ketan Sheth's Universal Commodity Exchange (UCX) has got in-principle approval; and Ispat Group’s Mittals-promoted Gontermann Peipers has applied for a license.

The key aspect for these players to get into the pool of commodity exchange business is that the high profit margins, i.e. expected to be a whopping 60%. Secondly, a lower initial cost brings down the actual costing and makes the business more convenient to start up.

The new entrants has also brought in large number of investors to the industry, as the Anil Ambani group has picked up stakes in ICEX and NMCE, while several other big shots including government agencies like Hafed and IFFCO have made presence in the commexes space in the country.

Further the range of commodities available for trading on the bourses is huge, while not many commodities are frequently traded on the bourses. As quoted in an Economic Times Report, BC Khatua, Chairman, Forward Markets Commission said, “Of the 110 commodities notified for futures trading, few are active, leaving scope for the development of many others.

FMC is the market regulator for the commodities markets. The amendments to the FCRA Bill will give additional powers to the regulator so as to make it at par with capital market regulator Securities & Exchange Board of India (SEBI).

The bill also makes provision for the FMC to open the doors for foreign and domestic institutional investors such as banks and mutual funds to indulge into commodities trading business. This also raises hopes of the fresh products like options and indices.

These measures are believed to fuel growth for commodity futures and make it outpace equities markets.

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