MCX-SX to seek Sebi guidance on FTIL divestment

Exchange proposes to place FTIL's holding to an escrow account

MCX Stock Exchange (MCX-SX) is likely to seek securities markets regulator Securities and Exchange Board of India (Sebi)’s guidance on the stake held by founder Financial Technologies (India) Limited, or FTIL.

The Jignesh Shah-promoted FTIL has missed the four-week deadline given by the Securities Appellate Tribunal (SAT). It had ruled in favour of Sebi, which had declared FTIL not fit to hold stake in a stock exchange.

As FTIL’s deadline ended on August 9, MCX-SX is in the process of writing to Sebi for further directions.

“Considering that FTIL has been unable to divest its stake in MCX-SX, we will propose to Sebi to put FTIL’s holding in an escrow account till the time it finds a suitable buyer for the stake or game plan for divestment,” a source said.

An MCX-SX spokesperson declined to comment.

Placing FTIL’s shareholding in an escrow account may not go down well with the erstwhile promoter.

A similar proposal was floated by the Multi Commodity Exchange (MCX) when FTIL had failed to divest its stake to two per cent within the deadline set by commodities derivatives regulator Forward Markets Commission (FMC).

FTIL and MCX hold about five per cent each in the form of equity in the exchange. These also hold convertible warrants in MCX-SX, which if converted will bring their combined holding to 72 per cent.

In March, Sebi had declared FTIL as not “fit and proper” after an FMC order that had declared FTIL unfit to hold stake in a commodity exchange.

The FMC order was a fallout of the Rs 5,600-crore settlement crisis at FTIL’s fully-owned subsidiary National Spot Exchange Limited (NSEL).

By the Sebi order, FTIL and MCX can neither hold equity shares nor convertible warrants.

Meanwhile, MCX-SX is struggling to maintain its net worth.

The exchange had made a rights offering worth Rs 544 crore in May to shore up its capital base.

The rights issue, however, managed to garner Rs 60 crore, or 11 per cent. After that, the MCX-SX net worth increased to Rs 121 crore, managing to meet Sebi’s Rs 100-crore net worth requirement for a stock exchange.

MCX-SX shareholders include 16 public sector banks and financial institutions, who together hold own 88 per cent stake in the exchange (excluding the warrants held by MCX and FTIL).

Meanwhile, trading volumes also have been dwindling at MCX-SX after the NSEL fallout.  The last trade on MCX-SX was on June 6, when it saw cash volumes of Rs 0.01 lakh, while the derivative volumes of just Rs 3 lakh.