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The board of directors of the Multi Commodity Exchange has decided to ask its promoter, Financial Technologies India Ltd (FTIL) to divest 5 per cent stake in the exchange, in order to meet the directions of the commodity market regulator, the Forward Markets Commission (FMC).
Nod from Govt agenciesCurrently, Financial Technologies holds 20 per cent in MCX after it sold 6 per cent stake in two deals. MCX then entered into an agreement with Kotak Bank to offload 15 per cent stake at ₹459 crore. However, the deal needs to be approved by various Government agencies, such as the Competition Commission of India and the FMC, besides MCX shareholders.
“The share sale to Kotak Bank is going to be a time consuming and lengthy process. In the meanwhile, if FTIL sells 5 per cent, we can approach FMC to lift the ban on launching new contracts for the next calendar year,” said a source at the exchange.
SEBI order & appealIn March, the capital market regulator SEBI declared FTIL as not ‘fit and proper’ to hold stake in any exchanges or clearing corporations, and directed it to sell its stake in all the exchanges. FTIL moved the Securities Appellate Tribunal against the SEBI order. In July, SAT upheld the SEBI order and gave FTIL four weeks to abide by the regulator’s order. The MCX board plans to seek SEBI’s permission to remove any restriction on FTIL to offload its entire stake in MCX.
Once FTIL sells 5 per cent stake in the market, sources added, MCX can request the FMC to remove the ban on launching new contracts for the next calendar year, as Kotak Bank has already agreed to buy the remaining 15 per cent.
Cost cutting measuresOver the next two to three weeks, the MCX board would negotiate with FTIL to bring down costs on all commercial contracts. This is part of the condition laid down by Kotak Bank in the memorandum of understanding signed with FTIL to acquire the MCX stake, sources said. To start with, FTIL has to reduce the tenure of software contract to 10 years from 33 years, and cut the charges drastically.
MCX has already reduced its software and support charges to ₹6 crore in the June quarter, as against ₹8 crore paid in the same period last year. The exchange had paid ₹11 crore in the March quarter.
Meanwhile, R Amalorpavanathan, Chief General Manager, Nabard, has been appointed additional director on the board of MCX.
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