FMC's conditional okay to MCX for contracts till March

However, the regulator also directed MCX to take all pending actions on findings of PwC Report and furnish a new compliance report by 15th Oct, 2014

Multi Commodity Exchange (MCX) has got a three-month conditional extension from the commodity markets regulator, Forward Markets Commission (FMC), to launch contracts till next March.

The regulator had held back approval for these in the wake of the scam at National Spot Exchange (NSEL), in which Financial Technologies India (FTIL) was anchor investor. FTIL was also anchor investor in MCX and FMC had wanted it to exit this role; it also directed a redrawing of the information technology contract between the two. Till then, it had said, it would freeze approvals for MCX’s forward contracts. It has said MCX can launch contracts till March 2015 once a new technology agreement with FTIL is signed.

Revision of the agreement was also one of the conditions for approving the share purchase agreement of Kotak Mahindra Bank in MCX; the former had bought a 15 per cent stake from FTIL’s holding.

It is important for MCX to get approval for launch of new contracts as most of the liquid ones are expiring in the next two months and a lack of carry-forward facilities is detrimental to the futures business.

FMC has in a letter to MCX on Wednesday said the latter could “launch all its contracts for the year 2015 once the full divestment by FTIL in MCX takes place, in compliance of (our) order dated December 17, 2013”.

The letter also directed MCX “to vigorously take all pending actions on findings of the PwC report (the audit done by PricewaterhouseCoopers in the wake of the scam) and furnish an updated compliance report by October 15”.

PwC had found several deficiencies and the regulator had told MCX to take remedial action.

On July 20 this year, the Jignesh Shah-led FTIL said it had signed an agreement to sell 15 per cent in MCX to Kotak Mahindra for Rs 459 crore. FTIL held 26 per cent in MCX before the scam. It now owns none. ANother five per cent was sold to veteran investor Rakesh Jhunjhunwala and the rest via bulk deals.