MCX-SX gets 1 more year to complete divestment

Its entry into IRF, equity derivatives hinges on this regulatory need.

Market regulator Securities and Exchange Board of India (Sebi) has granted the MCX Stock Exchange (MCX-SX) one more year to complete the bourse’s disinvestment process. The Financial Technologies group-promoted exchange has now time till September 15, 2010 to meet this regulatory requirement.

At present, MCX-SX is active only in the currency futures segment and has half of the market share. The exchange proposes to enter interest rate futures (IRF) and equity derivatives segments but did not grant it permission in the first round when the National Stock Exchange and Bombay Stock Exchange were permitted.

“The Exchange is fully geared to launch new contracts and products once the divestment is complete...,” said a statement issued by the exchange.

Though MCX-SX now has time till September 15, 2010 to complete the disinvestment process, the bourse is expected to try hard and finish the job before the new deadline. This is because the permission to launch more contracts in different segments hinges on completion of divestment.

The new bourse is already in talks with leading global exchanges, such as the London Stock Exchange and the New York Stock Exchange, private equity players and foreign as well as local institutions for selling stake. According to sources, some Asian stock exchanges and private equity firms have also shown interest.

MCX-SX has already announced sale of 18 per cent stake in the first round and 5 per cent in the second round. While in the first round, the 18 per cent stake will be sold to banks at a premium of Rs 9, IFCI will buy the 5 per cent stake at a premium of Rs 34 in the second round.

The IFCI deal, which has been questioned by the government nominee on the non-banking finance company's board, deal is a benchmark of sorts since MCX-SX will allot more shares to the Delhi-headquartered entity in case there are no takers for shares at Rs 35 each. Some of the institutional sources, who had been approached by the promoters of MCX-SX, said that the business proposition sounded good but the valuation was steep.

The exchange is planning to sell another 50 per cent stake, for which road shows are over, and in few days, book will be opened and offers invited.

Commenting on the development, MCX-SX Managing Director & CEO Joseph Massey said: “Our endeavour is to make MCX-SX a world-class exchange, which will bring in transparency and innovation along with the best domestic and global governance practices, products and partnership. We believe in systematic development of financial markets through information, innovation, education and research... .”