FTIL may challenge MCX board on stake cut

Challenging petition likely to be filed in Bombay HC shortly, said an official in the know

Financial Technologies (FTIL) is likely to challenge the order of the MCX board by which the exchange has asked its promoter to reduce stake from 26 per cent to less than two per cent within a month. A petition challenging the order is likely to be filed in the Bombay High Court shortly, according to a senior official in the know.

FTIL is weighing the option of whether to file the petition immediately or wait until January 6 when the HC is scheduled to hear a case filed by FTIL challenging the order of the Forward Markets Commission (FMC), declaring the MCX promoters not “fit and proper” to run an exchange. The board of the FTIL-promoted Multi Commodity Exchange (MCX) had met on Thursday to discuss the next course of action.

It decided it would write to FTIL to reduce stake from 26 per cent to two per cent of the paid-up equity capital, as ordered by the regulator, FMC. The board also decided to advise FTIL to withdraw its nominee,  Miten Mehta, on the MCX board in view of an FMC letter dated December 26.

“MCX is Asia’s first listed exchange. Hence, reducing stake from 26 per cent to less than two per cent and within a month is not possible. Hence, FTIL will obviously seek a stay on the MCX board order from the HC,” said the official. “Being sub -judice, we will not be able to comment on the matter,” said an FTIL spokesperson.

Taking cognizance of the FMC order, the MCX board is re-looking at the FTIL stake as the commodity derivatives markets regulator in its order dated December 17 found the company not “fit and proper”, a mandatory guideline to remain a large shareholder. As an anchor investor, FTIL holds 26 per cent stake in MCX.

Along with FTIL, FMC declared its promoter Jignesh Shah, ex-managing director of MCX-SX Joseph Massey and ex-MD and CEO of MCX Shreekant Javalgekar not “fit and proper”.

FMC order came in the wake of FTIL promoted National Spot Exchange defaulted payment of Rs 5500 crore to around 13,000 investors who comlained to the regulator seeking justice.