Shares of Financial Technologies (FT) and the recently-listed Multi Commodity Exchange (MCX) rallied over 20 per cent in a month, anticipating an approval for MCX-SX (stock exchange) to launch equity trading on its platform next week.
The Supreme Court had set a deadline of July 10 for Securities and Exchange Board of India (Sebi) to decide on allowing MCX-SX to operate as a full fledged stock exchange, on the lines of the National Stock Exchange and the Bombay Stock Exchange (BSE).
According to Sebi officials, a decision on MCX-SX would be taken early next week. Legal experts say under the new shareholding rules, MCX-SX would be allowed to launch equity trading. Sebi had asked MCX to apply afresh after it revises the manner of increasing and maintaining public shareholding (MIMPS) norms.
Both FT and MCX would stand to gain if MCX-SX starts equity trading, as together, they hold 70 per cent stake in the bourse. Under the new Sebi norms, the 60 per cent warrants FT and MCX held are now classified as equity stake. On Friday, FT shares closed at Rs 746 on the BSE, against about Rs 600 a month ago, while MCX’s shares closed at Rs 1,116.
Earlier, the exchange was denied permission for equity trading, as its promoters had failed to comply with the shareholding requirements.
However, Sebi has now said an exchange would be allowed up to three years to adhere to the shareholding norms, which require promoters to reduce their stake to five per cent. Therefore, Sebi would have to allow FT and MCX more time to pare their stakes in the exchange.
When contacted, MCX-SX said it would wait for further orders from Sebi.
In April, the tussle between MCX-SX and Sebi was taken up by the Supreme Court. A bench of judges Aftab Alam and C K Prasad had asked Sebi to reconsider MCX-SX’s plea, under the revised MIMPS regulations, within three months. The directive followed a petition by Sebi, challenging the Bombay High Court’s verdict setting aside its order rejecting MCX-SX’s application to operate as a stock exchange.
The apex court’s verdict was based on a consensus between Sebi and MCX-SX, vis-a-vis amendments to the MIMPS rules. According to the revised MIMPS norms, a recognised stock exchange would need to have a net worth of at least Rs 100 crore, and at least 51 per cent of the stake would have to be held by the public. Besides, no Indian entity (an individual or people acting in concert) would be allowed to acquire or hold more than five per cent stake, directly or indirectly, in a stock exchange.