Financial Technologies, MCX to exit Dubai Gold and Commodity Exchange

MUMBAI: Financial Technologies (FT) and Multi Commodity Exchange ( MCX), the promoters of the Dubai Gold and Commodity Exchange (DGCX), the Middle East’s largest bourse, will sell their 44 per cent stake in the exchange, three people with direct knowledge of the development said.


The government-owned Dubai Multi Commodity Centre (DMCC), which owns a 51 per cent stake, has the first right of refusal for the 44 per cent holding of the two Indian companies, one of the three people quoted above said. DGCX was set up in 2005 by the two partners, at which stage they held equal stakes. An FT spokesperson said they will not comment on market speculation.

The FT Group had valued DGCX at over $1 billion in 2007 when it sold a 1 per cent stake in the exchange to its partner DMCC for $12.5 million (around Rs 60 crore) and later another 5 per cent to Passport Capital, a foreign institutional investor. But, according to people familiar with the development, DMCC is seeking a lower valuation compared to 2007. Indian rupee futures contribute nearly $2 billion to DGCX’s average daily turnover.

On Tuesday, ET had reported that the Reserve Bank of India issued a circular on April 25 restricting equity participation by any Indian entity in a foreign bourse that trades financial products linked to the rupee as the currency is not fully convertible. DGCX has considerable strategic advantage as it is located in a time zone between Europe and the Far East. Also, a host of Indian bullion and diamond merchants have their offices in the Emirates.

More controversially, Dubai is said to be a hub of the illegal ‘hawala’ (cash transfer) market. Three instruments namely bullion, currency and metals are traded on DGCX. FT was the technology solutions provider to DGCX until recently till the exchange tied up with FT’s competitor Cinnober this year. DGCX also plans to launch trading in Sensex futures. DGCX has been riding piggyback on the rising volume of dollar-rupee futures trading, which was launched in 2007.

The Dubai exchange was the first bourse to offer dollar-rupee trading on an exchange platform even before regulations in India allowed domestic exchanges to launch trading in the segment in 2008.

palak.shah@timesgroup.com