MCX freezes FTIL voting rights in excess of 2%

To implement FMC's order, promoter has also been asked to divest stake

The Multi Commodity Exchange (MCX) board on Friday froze its promoter/anchor investor’s Financial Technologies India Ltd (FTIL) voting rights in excess of two per cent. It also asked FTIL to reduce stake from 26 per cent to less than two per cent.

In a note on Friday, MCX said its board had decided to write to FTIL. The note said, “With effect from the date of order of the Forward Markets Commission, they could no longer hold two per cent or more of MCX equity and since the FMC order is equivalent to a  civil court order, both FTIL and MCX are duty-bound to comply.”

It added, “The exchange, once again, calls upon FTIL to divest stake over two per cent and with immediate effect, any voting (by FTIL) in excess of two per cent will not be taken in to consideration.”

The exchange said it would approach the appropriate authority, seeking the directions that might be necessary to implement the FMC order.

In mid-December, FMC had, declared FTIL and three NSEL directors not ‘fit and proper’ to run the commodity exchange. Therefore, it had said, FTIL should not hold more than two per cent equity stake in the exchange. This means FTIL shall have to cut their stake in MCX from 26 per cent to bring t below two per cent.

In an affidavit in court, FMC said as it didn't regulate FTIL, its statement on reduction of stake was a conclusion, not an order. However, in a letter to MCX, it said as the exchange was a regulated entity, it should ensure the regulator’s order was implemented and FTIL reduced stake. It also threatened the exchange with legal consequences if the order wasn't executed.

On Friday, the high court here was to hear an appeal filed by FTIL against the FMC order. However, the court didn't take up the case; a new date in this regard is awaited.

In the past three days, three senior MCX officials of MCX have resigned, the reasons for which couldn’t be ascertained. There has been pressure on the exchange’s employees about an FMC-ordered audit by PricewaterhouseCoopers, which is expected to present a report in this regard in one or two weeks.