Sebi imposes ₹25 lakh penalty on MCX for disclosure lapses on payments

Sebi fines MCX ₹25 lakh for not disclosing ₹222 crore in payments to 63 Moons during delays in shifting to its new trading platform developed by TCS

The Securities and Exchange Board of India (Sebi) has imposed a penalty of ₹25 lakh on the Multi Commodity Exchange (MCX) for alleged lapses in disclosures regarding quarterly payments to 63 moons for extending the Commodity Derivative Platform (CDP) before the shift to the platform developed by Tata Consultancy Services (TCS).

 

While the market regulator had dropped several other allegations stated in the show-cause notice issued in October 2023 against the exchange and its management, Sebi has confirmed the violations of disclosure norms.

 

MCX paid ₹222 crore for three quarters between October 2022 and June 2023 to 63 moons for continuing services after the end date of the agreement, while the TCS platform was not ready. Sebi noted that these payments were not disclosed by MCX to the public in press releases or notes to the quarterly financial results, resulting in delayed disclosures. 

 

The amount paid to 63 moons for the three quarters exceeded the exchange’s annual profit of ₹118 crore in the previous financial year (FY21-22).

 

MCX had cited the uncertainty surrounding the shift to the new CDP due to prevailing Covid restrictions and the complexity of the project. The Sebi order also considered that any coercive legal action by MCX against 63 moons could have led to 63 moons abruptly stopping services after the end date of the agreement, which could have jeopardised the continuity of operations.

 

“Faced with a dilemma — damned if you do, damned if you don’t — MCX went ahead with the choice of a temporary extension of services, for which 63 moons extracted its pound of flesh. While the losses to MCX were substantial, it had to be ensured, at any cost, that the exchange and its Clearing Corporation (CC) functioned without any disruptions,” noted Sebi whole-time member Ashwani Bhatia in the order. 

New measures for appointment  of senior executives at MIIs 

Sebi on Monday came out with a process to appoint specific key executives of stock excha­nges and other market institutions. These measures are aimed at ensuring that MIIs (market infrastructure institutions) are staffed with qualified, independent key management personnel (KMPs) and directors wh­il­­e safeguarding market integrity through effective cooling-off policies.  Accordingly, Sebi came out with a process for the appointment, re-appointment, termination or resignation of key management personnel.