FMC-SEBI merger may help MCX hold up to 15% stake in MCX-SX

Suresh P Iyengar Mumbai | Updated on January 24, 2018

But, after warrant conversion, will be forced to divest some stake to meet shareholding norm

The Multi Commodity Exchange will become an indirect beneficiary of the Government proposal to merge the commodity market regulator Forward Markets Commission with capital market watchdog SEBI.

Deemed exchanges status

MCX, which has been knocking on the doors of SEBI unsuccessfully for the last few months, may get to hold up to 15 per cent in its erstwhile subsidiary MCX Stock Exchange against the now prescribed limit of 5 per cent once the Finance Bill is passed in Parliament.

The Finance Bill that paves the way for merger of FMC with SEBI provides deemed stock exchange status to all the four national commodity exchanges — MCX, NCDEX, NMCE and Ace Derivatives and Commodity Exchange — under the Securities Contracts (Regulation) Act, 1956. The market regulator will provide adequate time for the deemed exchanges to comply with the Securities Contracts Act, said the Finance Bill.

While commodity exchanges are allowed to hold only 5 per cent in other recognised exchanges under the Forward Contract Regulation Act, stock exchanges can invest up to 15 per cent in other exchanges.

Conversion, holding norm

MCX owns 2.72 crore equity shares, representing about 5 per cent stake of MCX-SX and 63.42 crore warrants, which are slated for conversion by June. On conversion, the commodity exchange’s holding in MCX-SX may touch about 36 per cent, according to market estimates.

For the last few months, MCX has been scouting for buyers to divest its holding in MCX-SX and comply with SEBI directions, but it has made negligible progress. The commodity exchange also holds 65 lakh equity shares of MCX-SX Clearing Corporation.

MCX had to restrain from paying dividend to investors last quarter as it was staring at the possibility of making a provision for diminution in value of its investment in MCX-SX when the warrants are converted into equity shares.

In response to the qualification made by auditors in the December quarter results, MCX said, based on the latest available financial statements of MCX-SX, the management is of the view that the carrying amount of investments of ₹138 crore which is equivalent to the cost of their acquisition, represents the fair value of these investments as on December 31, 2014. It added that it is in the process of evaluating the said investments.

Published on March 12, 2015

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