Last Thursday, top office bearers of the DSE met the officials of the Forward Markets Commission (FMC) to offer DSE's platform for the proposed bullion exchange. The DSE office bearers met the FMC jointly with the executives of some of the top bullion banks in the country like Scotia Mocatta, ABN Amro, State Bank of India, Corporation Bank among couple of others.

The size of the bullion hoard in the country is estimated to be in the region of 15,000-25,000 tonnes, which in value terms works out to Rs 67,500 crore to Rs 11,25,000 crore - larger than the deposits with the entire banking sector of India. Also, after the launch of the gold deposit scheme earlier this year, it has become important that trading in the bullion futures is commenced at the earliest in the country.

Surprisingly, however, the Bombay Bullion Exchange (BBA), the supposedly nodal association of the bullion trade in the country's financial capital has not yet been able to grasp the importance of the bullion futures in the country. Accordingly, the BBA has not been able to come to a unified conclusion on the subject and forward its proposal to the FMC despite couple of reminders for the same.

Given the urgency of the subject with both the government and the FMC to kick off the bullion exchange in the country the FMC had invited top office bearers of the BBA early last month to make their presentation to set up bullion futures exchange in the country. The DSE with its relatively weaker position in stocks dealing (compared to the two national level big brothers) dares to see its future in the bullion futures. Given their strength in both the reach across the country and generating volumes on their respective exchanges, both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) are understood to have shown their willingness to the commodity futures regulator FMC to set up the proposed NCE. The existing commodity exchanges, or if any new that may come up in the future, can become member of the NCE if they meet the membership criteria to be fixed by the FMC and the sponsors. The three-member high level committee headed by the FMC chairman KC Misra submitted last monthits proposal to set up the NCE to the ministry of civil supplies. The ministry's clearance is awaited.

This ongoing activity at both NSE and the BSE has fired the imagination of the officials of the DSE who seem to be finding a way out for their survival. And therefore, the pitch for the proposed bullion exchange. However, sources in the bullion trade, including top consultants like Bharghava N Vaidya feel that Mumbai is ideally located to serve not only the Indian market but also countries in the Middle East and the South Asian region. However, given the fact that there is no possibility of survival for more than one bullion exchanges in the country, the DSE office bearers are understood to have shown their willingness to offer their trading platform to the country's bullion trade linked with the one that may come up in Mumbai.

Meanwhile, in their presentation to the FMC last week, BN Vaidya and Associates have suggested that given the large trade in bullion metals in the country, there is no reason why both silver and gold should go to London (which offers hedging facilities) before reaching consumers in India and Middle East.

"If the hedging mechanism is available in India the players in the bullion trade, investors in the metals makers and exporters of bullion jewellery can save on huge commission costs that are payable to the London Bullion Metal Association (LBMA) members who offer hedging facilities".

Majority of the world trade in gold is done in 10 tola (TT) bars and kilo bars, while the London good delivery is 400 ounce (large bars). India can easily develop its refining industry and serve as a major distributor for internationally acceptable bars.