MCX-SX might extinguish MCX warrants

Move follows Sebi's latest order asking the exchange to comply with shareholding regulations

Securities and Exchange Board of India (Sebi)'s conditional approval to MCX Stock Exchange (MCX-SX) has put at risk founder Multi Commodity Exchange (MCX)'s warrants in the bourse. Warrants are long-term instruments that allow shareholders to purchase additional stock at a discounted price. Sources said MCX-SX may extinguish the warrants held by MCX, 35 per cent shareholding on conversion. The move is to comply with Sebi's Securities Exchange Clearing Corporations rules on shareholding. “We will be seeking advice from the regulators on extinguishing MCX warrants,” said an MCX-SX spokesperson.

The exchange had extinguished the same amount of warrants held by Financial Technologies (India) Limited, or FTIL, last month. FTIL has contested the issue.

MCX had written to Sebi to exempt it from divesting its holding, stating it was no longer a person acting in concert (PAC) with FTIL. Sebi has so far not accepted the proposal.

Separately, MCX-SX has sought clarity from Sebi on MCX's PAC status.

Sebi, which has renewed the exchange's licence by a year, has asked MCX-SX to strengthen its net worth and give a long-term sustainability plan.

"We plan to raise a lot more than Rs 100 crore for business expansion. We have appointed merchant bankers and are in advanced stages of discussions with potential investors. We are confident of fresh infusion of capital by December this year," said a company spokesperson.

In the past year, the market share of the exchange in the currency segment has seen a sharp decline from 40 per cent to a mere 15 per cent.