MCX board to meet on Friday over regulatory diktat on FT stake

Calls an urgent board meeting

The Multi Commodity Exchange (MCX), is convening a meeting of its board of directors on Friday, on a demand from the regulator to implement its earlier order declaring the promoters and some of its past managing directors unfit to run an exchange.

The meeting is to also consider a plan to ensure its anchor investors reduce stake as directed by the regulator, the Forward Markets Commission (FMC).  Friday is also when the high court here would consider an appeal of Financial Technologies (FTIL), the promoter of MCX, against the regulator’s order.

FMC asked the exchange on January 31 “to take immediate and effective steps to implement the order... declaring FTIL not ‘fit and proper’ to continue to be a shareholder of two per cent or more of the paid-up equity capital”. FTIL holds 26 per cent stake in MCX.

FMC had said if immediate action wasn’t taken, it would be treated as non-compliance of its directives, entailing “appropriate action”. FMC had given only 10 days for an action plan.

FMC has decided it doesn’t regulate FTIL directly and so, is forcing MCX, under its direct regulation, to take the action. FTIL had said MCX could not be forced in the matter when FMC’s order was under challenge in the HC. However, the exchange and the regulator have decided the order is valid as the HC has not stayed it.

FMC’s warning comes at a time when MCX’s volume has started improving. In January, its daily average volume increased 10.7 per cent over December. All other exchanges put together saw their January volumes fall 4.5 per cent.

MCX’s new managing director and chief executive, Manoj Vaish, took charge last Saturday. It is learnt the regulator had to intervene to ensure he took early charge. The new MD has to implement FMC’s order and begin the work of restoring the fall in volumes after last July’s imposition of a commodity transaction tax. In the following months, also due to restriction in the bullion trade and impact of the National Spot Exchange payments fiasco, the volumes traded here fell 70 per cent, till the January recovery mentioned earlier.