Besides Multi Commodity Exchange of India Ltd Stock Exchange, the group holds equity in its rival NSE, Delhi Stock Exchange (DSE), Vadodara Stock Exchange (VSE) and MCX-SX Clearing Corporation (MCX-SX CCL) and all these holdings would need to be disposed off within 90 days.
The Securities and Exchange Board of India (Sebi) order comes at a time when the MCX-SX is under the scanner of CBI for alleged irregularities in granting of licence to it in 2008 as well as subsequent renewals.
Financial Technologies (India) Ltd is the flagship firm of the Jignesh Shah-led group and one of the original promoters of MCX-SX.
In a late evening order, Sebi has said that Financial Technologies is not a "fit and proper person to acquire or hold any equity share or any instrument that provides for entitlement for equity shares or rights over equity shares at any future date, in a recognised stock exchange or clearing corporation".
This would be applicable for both direct and indirect holdings of Financial Technologies in stock exchanges and clearing corporations.
Cracking the whip, the Securities and Exchange Board of India (Sebi) has directed FTIL to offload direct and indirect holdings in in MCX-SX, MCX-SX CCL, DSE, VSE and NSEIL within 90 days.
Besides, Financial Technologies and the entities through whom it indirectly holds equity shares or any instrument entitling voting rights in MCX-SX, MCX-SX CCL, DSE, VSE and NSEIL shall cease to be entitled to exercise voting rights in respect of those shares or instruments, with immediate effect, according to Sebi.
Sebi had issued a show cause notice on "fit and proper" status of FTIL and the latter submitted its response earlier this week.
The show cause notice followed commodity market regulator FMC, in December last, asking how Shah and FTIL were 'fit and proper' to run any exchange in the wake of Rs 5,600 crore NSEL payment crisis.
FTIL and MCX were among the original promoters of MCX-SX, the country's youngest exchange, and following a restructuring they were shifted to public shareholder category.
The rejig was ordered by Sebi in the wake of the crisis at National Spot Exchange Ltd (NSEL), part of Shah-led group.
FTIL has already offloaded stakes in Singapore Mercantile Exchange and some other entities.
When contacted, a FTIL spokesperson said: "We will read the order and then comment".
Sebi today said that a person who is not 'fit and proper' to hold shares in commodity future exchange cannot be fit and proper person to hold share in the recognised stock exchange and the clearing corporation.
Such an entity poses same danger to the interest of securities market as to the commodity futures market as both the market require the same standard of integrity.
"Thus, there is no doubt that the declaration of FTIL as not 'fit and proper person' by FMC has direct bearing on the securities market," the order said.
FTIL had submitted before Sebi that since it was having less than five per cent stake in MCX-SX and insignificant shareholding in other recognised stock exchanges and clearing corporation, there would not be any bearing on the bourse.
However, Sebi has said that prohibition under SECC (Stock Exchanges and Clearing Corporations) regulations on a person, who is found to be not 'fit and proper person', is not dependent upon number or percentage of his/her shareholding or control in a recognised stock exchange or clearing corporation.
"It is also not dependent upon whether or not that person is represented in the board of directors of the recognised stock exchange or clearing corporation or he is person acting in concert with the management or board of directors of the recognised stock exchange or clearing corporation," the order said.
Last week, CBI had registered a Preliminary Enquiry against former Sebi chief C B Bhave as well as former member K M Abraham and others with regard to alleged irregularities in granting licence to MCX-SX in 2008 and subsequent renewals.