BackSebi grants conditional renewal to MCX-SX for one year
The regulator renews the licence for a period of one year till 15 September 2015, subject to conditions related to net worth and a long-term business sustainability plan
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Mumbai: The Securities and Exchange Board of India (Sebi) has renewed the licence of MCX Stock Exchange (MCX-SX) for a period of one year till 15 September 2015, subject to conditions related to net worth and a long-term business sustainability plan.
The capital market regulator has, however, barred the exchange from launching any new contract before fulfilling the net worth requirements.
“The exchange shall build its net worth (undisputed) to the level as prescribed in SEBI (SECC) Regulations 2012 within a period of three months from the date of renewal of recognition," said the release issued by Sebi.
The conditions have been necessitated due to the recent action of MCX-SX wherein it extinguished warrants worth Rs. 56.24 crore held by Financial Technologies India Ltd (FTIL) and transferred the non-refundable deposit against the warrants to the capital reserve to boost net worth.
Jignesh Shah-led FTIL has decided to take legal recourse against the exchange’s decision.
Sebi also wants the exchange to submit a business plan about its own long-term sustainability. While there is hardly any trading on the equity platform of MCX-SX, the currency derivatives segment is also seeing a gradual decline in the recent past.
From an average daily turnover of Rs. 4,563 crore in January 2014, it fell to Rs. 3,500 crore in August. In August 2013, currency derivatives worth Rs.11,650 crore were traded daily.
The regulator also directed the bourse to comply with its directions with regard to entities, which have been declared not “fit and proper" person and take immediate steps to rectify the deficiencies pointed out in the systems audit as well as special audit.
FTIL, which continues to hold 5% stake in MCX-SX, was declared unfit by Sebi in March. The order followed the ₹ 5,574.35 crore fraud at the Shah-promoted National Spot Exchange Ltd (NSEL).
FTIL appealed the Sebi order before the Securities Appellate Tribunal (SAT), which on 9 July upheld the ruling and gave the company and its affiliates four weeks to comply. The four-week deadline ended on 7 August, but FTIL has failed to sell its equity stake in MCX-SX.
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