As the National Spot Exchange (NSEL) lurches from crisis to crisis — another payment default looms large on Tuesday — its associate company MCX-SX’s equity trading licence could be in jeopardy when it comes up for renewal next month. “There’s absolutely no doubt that recent developments in the group will have a bearing on the matter. The fact that the promoters of the two exchanges are the same cannot be ignored,” a senior official said.
Both NSEL and MCX-SX are promoted by Financial Technologies India Ltd (FTIL). While Jignesh Shah, chairman and group CEO, FT, holds 18.8% in the company in his personal capacity, La Fin Financial Services has a 26.76% stake. As of June 30, FT and Multi Commodity Exchange of India — classified as the promoter group — held 71.84% of the diluted share capital of MCX-SX. This includes underlying shares assuming the full conversion of warrants and convertible securities.
While the Forwards Markets Commission (FMC) and the government will take a call on whether promoters of FT are considered “fit & proper” to continue operating NSEL, the Securities and Exchange Board of India (Sebi), which has been closely watching the developments relating to NSEL, would need to make its own assessment of whether MCX-SX’s stock exchange licence should be renewed.
Referring to NSEL promoters, FMC chairman Ramesh Abhishek told FE, “In our letter to the board we have stressed their status as a fit and proper person can come under pressure. We are waiting for tomorrow’s payout before deciding on this.”
Abhishek added, “You read the letter that we wrote to the NSEL board, we have clearly said that if they don't meet their obligation, they don't have a fit and proper state and consequential action would follow.”
In response to an email query, an MCX-SX spokesperson said: “Just as in previous years, the recognition granted by Sebi to MCX-SX is due for renewal on September 16 this year also. As per the usual process, we have applied for renewal to the regulator and the same is under their consideration.”
A Sebi notification, dated September 11, 2012, says MCX-SX was granted a renewal of recognition for “one year commencing on the 16th day of September, 2012, and ending on the 15th day of September, 2013”.
The notification was issued by Rajeev Kumar Agarwal, whole-time member, Sebi.