After a long wait and an intense legal battle, the Multi Commodity Stock Exchange (MCX-SX) may soon be allowed to launch equities trading on its platform. Currently, MCX-SX trades only currency derivatives.
The Securities and Exchange Board of India’s (Sebi) revised Manner of Increasing and Maintaining Public Shareholding (MIMPS) norms, which were notified on Thursday, will pave the way for MCX-SX to operate as a full-fledged bourse, like the National Stock Exchange or the Bombay Stock Exchange.
Among other things, MCX- SX was denied permission to launch equities trading, as its promoters were not able to bring down their shareholding in the exchange, as prescribed by the regulator.
Sebi has now said that any exchange, not in compliance with MIMPS regulations, will be allowed up to three years to adher to these regulations. Considering this, Sebi will have to allow Financial Technologies and MCX more time to bring down their stakes to five per cent each. After on Thursday’s revision, Sebi’s existing MIMPS regulations for recognised stock exchanges stand repealed.
Refusing comment, MCX-SX said it would wait for further orders from Sebi.
In April, the battle between MCX-SX and Sebi reached the apex court. A division 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 Supreme Court’s order had 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 SC verdict was based on a consensus reached between Sebi and MCX-SX, vis-a-vis the amendment to the MIMPS rules.
According to Sebi’s new MIMPS norms, every recognised stock exchange will have a minimum net worth of Rs 100 crore at all times and at least 51 per cent of the stake has to be held by the public. Besides, no Indian entity (either individually or together with persons acting in concert) would be allowed to acquire or hold more than five per cent stake directly or indirectly in a stock exchange.
However, stock exchanges, depositories, banks, insurance companies and public financial institutions from India can acquire or hold up to 15 per cent stake.
For a stock exchange that is not listed, a foreign institutional investors (FIIs) may acquire shares through transactions outside of a recognised stock exchange, provided it is not an initial allotment of shares; and for listed bourses, the FIIs can transact through the exchange where the shares are listed.
Sebi said that a recognised stock exchange may apply for listing of its securities on any bourse other than itself and its associated stock exchange, provided they comply with the new regulations of ownership and governance and the exchange has completed three years of continuous trading operations and received Sebi’s approval.
Also, the shares of a recognised stock exchange and a recognised clearing corporation would have to be in demat form, while clearing corporation cannot hold any right, stake or interest in an exchange.