Heavy cost for MCX-SX in FTIL separation

The MCX Stock Exchange (MCX-SX) has a problem on its hands in proceeding with the direction it has got to downgrade ties with Financial Technologies (FTIL), the promoter entity

A large part of the business link with FTIL is a licence to use technology software for trading on the exchange platform developed by the latter. There is a heavy cost for cancellation of the contract.

Insiders say FTIL’s contract with MCX-SX and the exchange’s clearing corporation is for 33 years and about five years are over. The amount payable to FTIL by both companies together is about Rs 27 crore a year per company. The termination clause, says a source, specifies the exchange must pay double the amount for the remaining years of the contract to FTIL.

Also, “the trading technology has successfully completed a 100 million transactions per day on the bourse and the company has been continuously upgrading to make it comparable with the best”, said Dewang Neralla, director of FTIL.

The exchange is also audited by the Union comptroller and auditor general and as part of this,  the technology pack has also been audited, he said. The technology, he said, met IOSCO standards.

The stock exchange now has a new management and a restructured board, with an outsider as chairman and as a managing director. They can argue that when the 33-year contract was signed, the exchange and FTIL were related parties; hence, there is a now a case to review the terms. Much discussion seems to lie ahead.