MCX-SX takes Sebi to court

Petition against delay in clearing application to operate as full-fledged stock exchange.

The MCX Stock Exchange (MCX-SX) has dragged the market regulator to court. In a writ petition filed on July 16 in the Bombay High Court (HC), the exchange has sought a response from the Securities and Exchange Board of India (Sebi) on its application for permission to operate as a full-fledged stock exchange.

The petition says Sebi should either reject or approve its proposal to trade in equities, equity derivatives, interest rate derivatives, mutual fund and debt market among other instruments.

The petition states that the regulator has not given any response even three months after MCX-SX fulfilled a key condition of bringing down promoters' stake.
 

IN A BIND

* MCX-SX currently trades only in currency futures

* Says it complied with all the guidelines in March

* Sebi deadline is Sept 23

* J Sagar Associates is representing MCX-SX

* Petition to come up for hearing in the Bombay HC on July 28

The notice was served on Sebi today. The petition will come up for hearing on July 28. J Sagar Associates is representing MCX SX.

While MCX-SX declined to comment, an email sent to Sebi remained unanswered.

MCX-SX had gone public on Friday with newspaper advertisements, pointing out that it was in a peculiar situation where the regulator did not give it permission to launch any new product but wanted it to divest equity to a wide base of investors. At the same time, prospective investors were not willing to buy stake in the exchange because there was no revenue.

Without naming any exchange, the advertisement by MCX-SX also said that its rival bourse was killing competition since it offered currency derivatives for free, and MCX-SX was forced to offer the same. “New investors wanted MCX-SX to have regulatory permission for all segments before investing, whereas Sebi wanted divestments before giving approval for other segments,” the advertisement noted.

The advertisement also said “there have been attempts by some elements at spreading misinformation to create doubts among our shareholders and to undermine our reputation and business for their benefit”.

MCX-SX said it had fulfilled Sebi’s condition by a 'capital reduction cum arrangement' scheme, which was approved by the Bombay HC.

While the scheme of reduction of capital brought down the stake, each of the two promoter entities — the Multi Commodity Exchange of India and Financial Technologies (India) Ltd — hold five per cent each and warrants amounting to 60 per cent of the ownership. Warrants are not included while calculating the equity ownership, according to Sebi regulations.