Mired in controversies and struggling to maintain investor confidence, Multi Commodity Exchange of India’s currency and equity arm, MCX-SX, is facing a new challenge, that of exodus by its members.
In the last six months, as many as 26 members have surrendered their MCX-SX memberships, while several others are in the process.
Demand for NSE, BSE riseWith zero participation from associates and clients, broking houses decided to surrender MCX-SX Currency Derivatives Segment memberships. Instead, on offer are the NSE and the BSE Currency Derivatives platforms.
Also, a notification last month by the Reserve Bank of India allowing domestic hedgers to take position exceeding $10 million on a single exchange by providing documents establishing the existence of the underlying exposure, has prompted many to leave MCX-SX.
However, in reply to an emailed query, the MCX-SX spokesperson stated, “Members who are not actively trading, i.e., inactive since their registration with the Exchange are only approaching to surrender their membership.”
The exchange has added 10 new members during July 1, 2013, to June 30, 2014, while 38 memberships were surrendered during the period.
Volumes dwindleVolumes too have started dwindling on MCX-SX. On July 31, traded value in currency derivatives stood at ₹3,626 crore, which was ₹4,632 crore in November 2013.
Also, MCX-SX’s market share in the currency derivatives segment dropped to 18 per cent in July from 29 per cent in November last, whereas that of BSE’s has increased significantly to 27 per cent from 2 per cent during the period.
“The currency derivatives market faces major issues due to RBI regulations. But in MCX-SX’s case, there are other issues such as the group’s lost credibility and trust and uncertainty about the future of the exchange,” said Kishore Narne, Associate Drector, Motilal Oswal Commodity Broker Pvt Ltd. Although Motilal Oswal has not surrendered its membership, it is under suspension mode with no trading taking place on it.
Other smaller trading houses preferred surrendering their memberships. A Mumbai-based financial services provider, Investerial Financial Services had sent out notices to its members intimating them about surrendering MCX-SX membership post July 31.
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