Sebi imposes ₹25 lakh fine on MCX for disclosure lapses, misleading info

MCX fined ₹25 lakh by Sebi for failing to disclose timely payments to 63 Moons and delays in migrating to a TCS-developed trading platform

On Monday, India’s markets regulator, the Securities and Exchange Board of India (Sebi), imposed a fine of ₹2.5 million (approximately $29,383) on Multi Commodity Exchange of India Ltd (MCX) for lapses in disclosure and for providing inaccurate information regarding its trading software contract.

 

The penalty stems from prolonged delays in MCX’s migration to a new trading platform developed by Tata Consultancy Services (TCS), while continuing to rely on an older system provided by 63 Moons Technologies Ltd (formerly Financial Technologies India Ltd).

 

Platform migration delay

 

MCX, initially backed by 63 Moons, had used its trading software since inception in 2003. Over time, 63 Moons reduced its ownership in MCX from 100 per cent as of 30 March 2005 to zero by 30 September 2014.

 

Under the original software licence, MCX was entitled to use the system for 99 years. However, to keep the platform operational, it entered into supplementary agreements with 63 Moons for support services—continuing to pay significant sums even after the original licence terms.

 

In 2018, after Sebi brought commodity exchanges under its direct oversight, MCX was required to shift clearing and settlement operations to its subsidiary, MCX Clearing Corporation Ltd (MCXCCL). This led to the need for a new trading platform, and in 2021, TCS was contracted to develop the Commodity Derivatives Platform (CDP).

 

However, the project encountered major delays, missing several go-live deadlines. In response, MCX extended its support contract with 63 Moons multiple times at steep costs—paying ₹60 crore for the quarter ending December 2022, ₹81 crore per quarter for the two quarters ending June 2023, and later ₹125 crore per quarter for the two quarters ending December 2023.

 

 

Sebi said MCX failed to disclose these payments in a timely manner, only revealing them in January 2023. The regulator noted that while initial announcements mentioned the extension of 63 Moons' services, they did not include the financial details, which were substantial and exceeded MCX’s annual profits.

 

In its latest order, Sebi acknowledged the operational complexities faced by MCX, but criticised the exchange for not being transparent with stakeholders about the financial impact.

 

Sebi stated: “MCX was clearly caught in a Catch-22 situation where the timely operationalisation of the CDP project looked uncertain due to the complexity of the project and the prevailing Covid restrictions. At the same time, any coercive legal action by MCX against 63 Moons could have led to an abrupt cessation of services, jeopardising the continuity of operations.”

 

“It must be reckoned that MCX and MCXCCL were ultimately able to operationalise the CDP project without glitch and inconveniencing investors,” the order added.