9:02 AM
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The Securities and Exchange Board of India (Sebi) will
decide on the renewal of MCX-SX’s currency exchange licence on the basis of the
outcome of the court case for allowing it to run an equity exchange. The
licence is due for renewal on September 15. MCX-SX had approached the Bombay
high court to challenge a Sebi order that rejected its application for
permission to launch equity operations. The next hearing of the case is on
Friday. The court had adjourned the case on August 26 after hearing both sides.
A senior Sebi official told Business Standard renewal of the MCXSX’s currency
exchange licence would depend on the outcome of the equity operations case.
“If they are not considered fit for dealing in equity,
then how will they be fit for handling currency?” said the official.
He said if the outcome was in the shape of a process
through which the issues raised by Sebi for permitting equity operations could
be resolved, then the currency exchange licence renewal would happen in the
normal course. “The result of the case will have a direct bearing on the
regulator’s decision on the currency exchange operations of MCX-SX,” he said.
An MCX-SX spokesman declined to comment on the possible
implications and said, "The high court has heard our position and that of
Sebi’s regarding your query, amongst other issues related to the MCX-SX versus
Sebi case. The hearing is at a final stage and is listed for tomorrow.
Providing any view in this matter at this juncture would be preposterous and
may lead to contempt of court and we would not like to comment anything till
the court pronounces its order in this matter," he said.
MCX-SX is the number one exchange in the currency
derivatives market. The other two players are National Stock Exchange (NSE) and
United Stock Exchange (USE). MCXSXs currency futures turnover in August was `4,50,761.08
crore, followed by NSE’s `4,07,969.81 crore and USE’s `3,11,943.96 crore .MCX-SX
started operating in the currency derivatives segment in 2008 and its licence
for the segment has already been renewed twice. Sebi had given MCX-SX a years
extension in September last year to offer trading in currency derivatives, even
as it awaited the market regulator’s approval to start business in equities.
Sebi, however, decided against giving permission for equity
exchange operations to MCX-SX, due to apprehensions over the shareholding
pattern. The latter then challenged the September 2010 Sebi order that rejected
its application to deal in other segments, including equities.
Sebi had found the exchange short of compliance in its
shareholding norms and had taken objection to two key shareholders, Financial
Technologies (FTIL) and Multi Commodity Exchange (MCX), holding warrants and
their buyback arrangements with some banks. The regulator had objected to FTIL
and MCX acting in concert, in violation of Sebi rules.
In a
hearing in April, counsel representing FTIL and MCX argued the findings were
all related to the promoters, who were never given an opportunity of hearing by
Sebi before the exchange’s application was rejected. Sebi, however, maintained
the apprehensions raised at the time of rejection of MCXSX application for
dealing in other segments were still valid.