and public domain checks on these identified 676 additional entities or individuals who could be deemed to be directly or indirectly related to either MCX or the FT group, FTIL key management personnel or their immediate family members. It alleged that out of these related parties, select entities or individuals were identified as being members or clients who traded on MCX platforms over the years.
“Specific abnormal patterns have been noted in trades performed by these entities as wash trades,” said the report, asserting that regulators in India prohibit such practices. Pertaining to agreements and transactions with National Bulk Handing Corporation (NBHC) and other FT group companies, PwC said MCX was unable to demonstrate or provide documentation to support whether the warehousing requirements agreed upon with NBHC were indeed commensurate with MCX’s scale of operations and in line with its business requirements. PwC could not substantiate the compensation agreed to be paid by MCX to NBHC by any market benchmarking or competitive bidding process. Hence the actual utilisation of warehouses or existence of warehouses that were deemed to have assigned to MCX could not be ascertained. The review also identified 15,131 instances of trades aggregating to about Rs 1,856.56 crore where the same party placed buy and sell orders within 60 seconds of each other resulting into no change in position.
Joined at the hip
* MCX incurred an expense of R649 crore for services provided by FTIL
* A sum of R709 crore paid by MCX to disclosed set of related parties
* Commercial terms between MCX and related parties not substantiated by market benchmarks
* Senior FTIL management played a key role in deciding terms between MCX & FT Group firms
* MCX, a key customer for FTIL, drove 25% of FTIL revenues
* MCX and FT Group have disclosed names of 235 related parties
* Checks show 676 additional parties, directly or indirectly, related to MCX or FT group
* Abnormal patterns in trading noted by these entities such as ‘wash trades’
* MCX bought hardware through FTIL at an added mark-up of 20-32%