MCX slashes fees and deposits for SEA members

Competition is hotting up among the newly floated commodity exchanges. The first mover, Multi Commodity Exchange or MCX has decided to give huge concessions to the 750-odd members of the Solvent Extractions Association or SEA by slashing the admission fee and security deposit substantially.

According to a recent circular issued by MCX, as against the standard payments made by other members, SEA members would get a 57 per cent reduction in security deposit at Rs 1.5 lakhs against the existing Rs 3.5 lakhs. The exchange has also offered a close to 86 per cent reduction in admission fee, which will be Rs 50,000 as against Rs 3.5 lakhs and a 40 per cent reduction in annual subscription from the present Rs 25,000 to Rs 10,000.

More interestingly, the net worth requirements of Rs 10 lakhs from individuals and registered firms and Rs 25 lakhs from corporate bodies have been waived off in this special offer and do not find a mention in the circular.

If all the 750 SAE members fall for such a tempting and unusual offer, MCX will garner a handsome sum of over Rs 11.50 crores by way of security deposits and will pocket another Rs 3.75 crore as admission fees from these members. Jignesh Shah, managing director, MCX said, "In order to promote futures trading in the vegetable oil segment, MCX has decided to reduce the membership fee and security deposit for all the existing members of SEA.

Under this offer, the members would be entitled to take commodity-specific, trading-cum-clearing membership, which would allow them to trade in any commodity in the vegetable oil
segment including oilseeds and extractions." However, he said, MCX will not allow the SEA members to sell or exchange the trading membership

MCX officials said that the security deposit of Rs 1.5 lakhs will enable a member to have a 20 times outstanding position i.e. Rs 30,00,000 at any point of time. However, MCX's special offer for SEA members has raised the eyebrows of the other members in the trade.

Some of the existing MCX members, particularly those from the Bombay Metal Exchange, Bombay Bullion Association and Pulses Importers Association, with whom MCX has strategic tie-ups, are disillusioned with the new move of MCX. "This action smacks of double standards adopted by MCX and is not in good faith. I fail to understand why such an option of commodity specific trading is not offered to all the existing MCX members. Are we going back to the age old system of commodity trading where a select group used to control the exchange" queried a MCX member who did not want to be named