HC directs SEBI to decide on MCX nod by Sept 30

The Bombay High Court on Tuesday directed the Securities and Exchange Board of India (SEBI) to decide on the application filed by MCX Stock Exchange (MCX-SX) seeking permission to start trading in equity and other segments on its platform within six weeks — September 30. A division bench comprising Chief Justice Mohit Shah and Justice S C Dharmadhikari also said SEBI must pass an order within three weeks regarding the renewal of the recognition of the MCX-SX. The court also asked Financial Technologies (FTIL) and MCX,the promoters of the exchange,to pass a suitable board resolution that they would “at all times will not go beyond limits prescribed under MIMPS Regulations within 10 days from today”. The court said that the SEBI must get the required information from banks within ten days. It said SEBI must call upon MCX-SX in case they require any further clarification,and give hearing to MCX-SX within 10 days thereafter and dispose of application of MCX-SX for other segments by September 30,,2010. In April this year,MCX-SX,which at present trades only in currency derivatives,had applied to the SEBI seeking permission to start equity trading and expand operations. It moved the court later complaining that the regulator was not allowing it to start equity trading despite complying with all the regulations of the regulator. SEBI had given time till September 15 to MCX-SX for full compliance of its regulations. Advocate General Maharashtra Ravi Kadam,appearing for MCX-SX,said,”MCX-SX applied for all products through its several letters/ reminders which were simply not responded by the SEBI. This was hurting MCX-SX badly and was causing a daily loss of approximately Rs 1500000 per day and as on today there is a loss of Rs 1000000000 due to absence of other segments.” Kadam pointed out that it was not correct for the SEBI in the first instance to restrict MCX-SX to only one product,whilst on the other hand there are 22 exchanges with full operations. “Further in order to attract investors and comply with MIMPS guidelines,it is absolutely necessary that the exchange gets full business,” Kadam said. Additional Solicitor General Darius Khambatta,representing the SEBI,did not respond to any points raised by Kadam,but wanted time to investigate press reports in respect of buy-back arrangement,if any,between the promoters and banks. CA Sunderam,who appeared on behalf of FTIL,explained to the court that “as promoters they were and they will be in compliant of MIMPS Regulations”. “In the absence of rules for listing of any stock exchange any investor who invest may want an option to exit,and there is nothing wrong in the promoters to offer such comfort. In any event the Scheme of Reduction as unanimously approved by all shareholders,would make any such arrangement infructuous and irrelevant. Further FTIL is willing to offer any undertaking that they were and are still willing to comply with the MIMPS Regulations. They simply cannot acquire even single share in violation of the MIMPS Regulations,” he said. MCX-SX says Financial Technologies and commodity bourse MCX hold 5% each in it. The petitioner said MCX-SX and the promoters — FTIL and MCX — took various steps to comply with MIMPS Regulations and invited 18 public banks to invest in the MCX-SX.