In the Sebi-MCX-SX legal tussle, the promoters of the MCX Stock Exchange (MCX-SX) on Friday agreed to reduce their collective holding in the exchange to five percent. However, the Bombay High Court (HC) on Friday reserved judgement on the petition filed by MCX-SX, which challenged market regulator Sebi's refusal to allow it to trade in stocks and other securities.

The Bombay HC, further gave the option to the promoters of the exchange to either authorise an increase in the share capital or offload the existing five per cent, so that the MIMPS regulations are not violated at any point in time.

Senior counsel JJ Bhatt, appearing on behalf of the exchange, said on friday that the fresh undertaking will apply even if the promoters exercise the warrants or buyback.

Among the various issues, the market regulator Sebi had earlier rejected the MCX-SX's application due to its holding structure.

The Division Bench of justices Dhananjay Chandrachud and Anup Mohta noted that the issue of share-holding was at the heart of the matter. The promoters of MCX-SX-FTIL and MCX were under the same management and it collectively held 10% equity in the exchange.

Jignesh Shah is the chairman and group CEO of FTIL and non-executive vice-chairman of MCX.

And Sebi guidelines stipulate that no individual or entity, directly or indirectly, other than public financial institutions, can hold more than five per cent stake in a recognised stock exchange. The case came up for hearing before the Bombay HC after MCX-SX filed a petition challenging a Sebi order dated September 23, 2010, that denied it permission to function as a full fledged stock exchange.