MCX head quits bullion association board

FMC to seek further clarifications from the exchange on the issue

After the controversy on National Spot Exchange Ltd’s operations, a subsidiary company and its clearing member, the Indian Bullion Market Association Ltd (Ibma) is under scrutiny.

Shreekant Javalgekar, a professional with the FT group (of which NSEL is a part) and now managing director of the Multi Commodity Exchange, has stepped down from the board of directors of Ibma. This is after the Forward Markets Commission’s objection to Ibma’s trading activity on the MCX. The regulator also wants to know how and why Ibma was allowed to do so.

Ibma was set up by NSEL with nearly two-third equity stake, with some bullion traders, about four years earlier. The plan was to set up a spot exchange for bullion trading. However, this didn’t materialise and Ibma became a clearing member on NSEL. However, as an entity, it was trading in a small way on MCX, as several bullion traders who were also shareholders of Ibma wanted that hedging mechanism for gold exposure.

This has been stopped, MCX said on Friday. However, FMC wishes to know how it took place at all, as its rules say entities related to promoters of a commodity exchange cannot trade on its own exchange. Ibma was a company floated by NSEL, which was promoted by FT; so was MCX.

When asked, FT’s spokesperson said it had not got any new communication from FMC in this case. He confirmed Javalgekar had stepped down in early August from the board of Ibma. And, that Ibma was not a member of MCX; it had traded in the capacity of a client.

MCX had also clarified on Friday that Ibma’s volume as a percentage of total exchange turnover was 0.09 per cent in 2012-13 and 0.17 per cent in 2013-14.

As on date the exchange does not have any open position or pay-in/pay-out obligations with respect to Ibma.