MUMBAI (Reuters) - The Forwards Market Commission (FMC) has moved to strengthen corporate governance of commodity exchanges by issuing guidelines to restrict board representation by promoter members.
Under the guidelines, a promoter of an exchange cannot have board representation higher than their total shareholding, capped at 26 percent at the end of the fifth year of operation, the commodity regulator said late on Friday.
These revised guidelines follow the National Spot Exchange Ltd (NSEL), MCX-SX's affiliated commodity exchange, abruptly suspending trading in August. NSEL has since struggled to square off outstanding contracts worth over 55 billion rupees.
The regulator has asked exchanges that the shareholding of all commodity exchanges be modified with a view to ensuring a broad-based board representation of all classes of shareholders.
The guidelines mandate shareholder classes including government companies, banks, public financial institutions, co-operative societies, warehousing companies and the stock exchange owning the commodity exchange must form at least half of the total board of directors.
The regulator has asked all exchanges to incorporate the provisions of the guidelines in their bye-laws and submit a proposal to the FMC to seek approval of the appointment of directors as per these guidelines by September 30.
(Reporting by Swati Bhat)