MCX Stock Exchange Ltd (MCX-SX), embroiled in a legal tussle with India’s market regulator, could face another hurdle in its attempt to get a licence for equity trading.
A majority of MCX-SX’s shareholders have trading rights in its currency derivatives platform. This is not in conformity with the Securities and Exchange Board of India’s (Sebi) ownership norms that forbid firms with trading rights from owning more than 49% of a stock exchange, adding a new twist to the dispute between the two.
The issue came to light after Sebi issued a show-cause notice to another exchange, the United Stock Exchange of India Ltd (USE), over similar issues recently.
Trading members have a 49.75% stake in USE and account for more than a quarter of the governing board, another alleged violation of Sebi’s rules.
Sebi had found MCX-SX non-compliant with ownership norms in 2010.
It objected to the manner in which Multi Commodity Exchange of India Ltd (MCX) and Financial Technologies (India) Ltd (FTIL) pared their stakes in the exchange by issuing warrants to banks and financial institutions, and found them acting in concert. MCX-SX filed a writ petition against the order. The Bombay high court has reserved its judgement on the case.
Sebi said the promoters hold stakes of roughly 72%, including economic interest, but MCX-SX said the two hold just 5% each and the rest of the shareholding vests with banks and other financial institutions who own the warrants.
The promoters of the exchange—MCX and FTIL, which originally held 51% and 49%, respectively—lowered their shareholding by divesting 16% to financial institutions and later issuing warrants to the extent that they held 5% each.
However, MCX-SX’s claims and the data on ownership available on its website suggest a different scenario as trading members account for roughly 83% shareholding.
Since a large part of MCX-SX’s stake is divided among banks and financial institutions, most of whom trade currency derivatives on the bourse, the stake of shareholders with trading rights is higher than in other exchanges.
This issue has not been flagged in the court case between Sebi and MCX-SX, but could assume importance in case the Bombay high court quashes Sebi’s order and upholds MCX-SX’s claims, a person with direct knowledge of the matter said on condition of anonymity.
“If Sebi’s interpretation is dismissed by the court, then the issue of shareholders with trading rights becomes relevant, going by MCX-SX’s submissions in court,” the person added.
prohit chauhan
pgdm 2 nd sem
A majority of MCX-SX’s shareholders have trading rights in its currency derivatives platform. This is not in conformity with the Securities and Exchange Board of India’s (Sebi) ownership norms that forbid firms with trading rights from owning more than 49% of a stock exchange, adding a new twist to the dispute between the two.
The issue came to light after Sebi issued a show-cause notice to another exchange, the United Stock Exchange of India Ltd (USE), over similar issues recently.
Trading members have a 49.75% stake in USE and account for more than a quarter of the governing board, another alleged violation of Sebi’s rules.
Sebi had found MCX-SX non-compliant with ownership norms in 2010.
It objected to the manner in which Multi Commodity Exchange of India Ltd (MCX) and Financial Technologies (India) Ltd (FTIL) pared their stakes in the exchange by issuing warrants to banks and financial institutions, and found them acting in concert. MCX-SX filed a writ petition against the order. The Bombay high court has reserved its judgement on the case.
Sebi said the promoters hold stakes of roughly 72%, including economic interest, but MCX-SX said the two hold just 5% each and the rest of the shareholding vests with banks and other financial institutions who own the warrants.
The promoters of the exchange—MCX and FTIL, which originally held 51% and 49%, respectively—lowered their shareholding by divesting 16% to financial institutions and later issuing warrants to the extent that they held 5% each.
However, MCX-SX’s claims and the data on ownership available on its website suggest a different scenario as trading members account for roughly 83% shareholding.
Since a large part of MCX-SX’s stake is divided among banks and financial institutions, most of whom trade currency derivatives on the bourse, the stake of shareholders with trading rights is higher than in other exchanges.
This issue has not been flagged in the court case between Sebi and MCX-SX, but could assume importance in case the Bombay high court quashes Sebi’s order and upholds MCX-SX’s claims, a person with direct knowledge of the matter said on condition of anonymity.
“If Sebi’s interpretation is dismissed by the court, then the issue of shareholders with trading rights becomes relevant, going by MCX-SX’s submissions in court,” the person added.
prohit chauhan
pgdm 2 nd sem
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