MCX-SX's Currency Trading Licence extended by SEBI

The Securities and Exchange Board of India (SEBI) on 14 September 2011 approved the application for renewal of registration for currency futures trading of MCX Stock Exchange (MCX-SX). The approval followed issue of  a showcause notice by SEBI to the exchange asking the bourse to explain why its application for renewal of registration for currency futures trading should not be rejected.

SEBI mentioned that the renewal was subject to the outcome of litigation in the Bombay High Court between SEBI and MCX-SX relating to compliance with share holding norms of a stock exchange.

Sebi's conditional approval for the currency segment is valid till 15 Sept 2012. A Sebi notification issued in this respect specified that the extension was in the interest of trade.

Sebi had issued a showcause notice on 13 September after the Bombay High Court asked the regulator why MCX-SX was found wanting when it came to trading in equities if it were fit to launch a currency trading platform. In response to the court's observation, the SEBIcounsel had agreed to reconsider its recognition given to MCX-SX when its application for currencies came up for renewal.

after renewing the currency futures registration in September 2010,  Sebi had passed an order barring MCX from launching trading in equities on the grounds that it had not complied with shareholding norms for a stock exchange. These rules restricted a single investor's holding in a stock exchange to 5%.

Sebi had directed the exchange's promoters, Financial Technologies, and commodity exchange MCX, to fulfil shareholding norms relating to ownership of an exchange, which limit a single investor's holding in a stock exchange to 5%, before granting approval for the equity segment.

The MCX-SX had then come up with a capital restructuring scheme, which involved its promoters cutting their stakes to 10% from a combined 70%. In lieu of the capital reduction, the promoters issued themselves warrants that could be converted into equity shares six months after they were sold to investors. SEBI, however had rejected the scheme in September 2010. Following SEBI’s rejection MCX-SX had approached.

The average daily turnover in the currency futures market over the past seven months was in the tune of 41696 crore. Of this, MCX-SX has 43% market share, the NSE has a 37% share while the USE has 20%.