In December last year, commodity markers regulator FMC had declared promoter Jignesh Shah and FTIL "not fit and proper" in connection with a R5,600-crore settlement scam at the National Spot Exchange Ltd (NSEL), a wholly-owned subsidiary of FTIL. Later, even stock market regulator Sebi declared both Shah and FTIL unfit. According to regulatory norms, any person declared unfit can't hold shares in any of the exchanges, so FTIL was required to sell its 26% stake in MCX.
The market share of MCX started falling at a fast pace after October last year, as the settlement crisis at group firm NSEL on top of a 0.01% transaction tax on non-farm futures hit trading.
While MCX had grabbed a market share of 86% during the July-September quarter last year, its dominance declined and the market share dropped to 78.4% in the second half of the last fiscal. However, MCXs market share has held steady at above 80% starting April 2014, mainly as regulators and other government agencies stepped in to calm fears in the market. FMC will release the fortnightly turnover data for all exchanges later this month.
FTIL said on September 29 that it completed the sale of its last tranche of shares totalling 15% in MCX to Kotak Mahindra Bank for R459 crore, marking its departure from the bourse after weeks of uncertainty surrounding the sale. FMC had threatened MCX that it wouldn't allow launches of contracts if FTIL didn't exit the bourse.
Analysts have also blamed the commodity transaction tax for the drop in MCX's turnover. Following imposition of the tax on the seller in July last year, costs of trading on the MCX platform rose to R6.60 from R1.60 on a transaction value of R1,00,000. Similarly, costs on other national-level exchanges also trebled in July last year from the previous months level, which hurt turnover as some investors shifted to the stock market.
On July 31 last year, NSEL was forced to suspend one-day forward contracts and defer settlements after the government said the exchange was violating rules by allowing contracts of tenures longer than 11 days. On August 6, the exchange stopped its e-series contracts, marking the end of trading on its platform for the time being.