The looming uncertainty over the largest technology transition being undertaken by the Multi Commodity Exchange (MCX) has started to concern market regulator SEBI.

For the first time since it was founded nearly two decades ago, MCX is switching over its trading and settlement technology service provider from 63 Moons Technologies to Tata Consultancy Services (TCS). However, the regulator wrote to MCX on August 10, expressing its concerns that it was not made aware of the challenges being faced by the exchange and its clearing corporation MCXCCL, regarding the technology transition. SEBI told MCX that it has learned only recently that the latter will not be able to deploy the software by TCS in September.

‘Serious issue’

“The present service contract of 63 Moons expires on September 30 and even if TCS delivers all the functionalities, MCX and MCXCCL have no time to conduct the necessary tests (such as user acceptance testing, member and empanelled vendor testing, member mock, parallel run, etc) before the end of the support from 63 Moons,” the letter said.

SEBI further told MCX that it was a serious issue, which has to be assigned the highest priority and resolved timely. “Being a market infrastructure institution, it is necessary that MCX and MCXCCL ensure, on a continuous basis, that they have adequate infrastructure and systems in place to ensure the orderly execution of trades and timely clearing and settlement of trades as well as having online surveillance capability,” SEBI told MCX.

The letter further stated that it was suggested that the exchange may also explore utilising software-as-a-service (SaaS) model with any of the existing exchanges/clearing corporations until MCX and MCXCCL are ready to handle the transition. It also disclosed that a meeting was held among between the chief technology officers of MCX, MCXCCL and NSE Clearing on August 1 wherein the aspects pertaining to SaaS were discussed.

Disclosure to bourse

“You are advised to provide by August 17, a detailed action plan along with timelines containing various alternatives — plan A, B, etc — to deal with the technology transition effectively,” the letter added.

MCX did not reply to a query from BusinessLine on the matter. But sources said the exchange has already replied to the regulator. A senior SEBI official said the matter is serious and MCX should have also made disclosures about it to the shareholders at large since large shareholders having a director on the board of MCXCCL are aware of it. Also, the exchange should have disclosed the letter to the exchanges it is listed at, since it is a price-sensitive issue. SEBI is also looking into this aspect, the official said.

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