MCX allowed to launch new contracts after FTIL stake transfer

Commodity market regulator Forward Markets Commission (FMC) has allowed Multi Commodity Exchange (MCX) to launch new contracts for January, February and March 2015 after if it signs a fresh technology deal with its erstwhile promoter Financial Technologies India Ltd (FTIL).

FMC can launch fresh contracts up to March 2015 once FTIL signs a revised technology agreement with MCX, a pre-condition to transferring a 15-per cent stake in the exchange to Kotak Mahindra Bank

The regulator's move to allow the country's largest commodity futures bourse to function will provide much-needed relief to commodity futures markets participants.

FMC, however, made it clear that the bourse will be allowed to roll out contracts for all 12 months of 2015 only after the full divestment of Jignesh Shah-promoted Financial Technologies in MCX takes place as per the regulatory norms.

FMC has been withholding permission for MCX to start trading over failure to bring down FTIL's stake from 26 per cent to 2 per cent as directed by the regulator.

The commodity market regulator had declared FTIL unfit to run any exchange in the wake of the Rs5,600-crore payment crisis at group company National Spot Exchange Ltd (NSEL).
FTIL has exited the bourse by selling its entire stake to various investors.

However, its deal with Kotak Mahindra Bank to sell a 15-per cent stake in MCX is yet to be completed.

FTIL has assured the regulator that it will sign the new technology deal by the end of this month.

MCX has been seeking permission to launch fresh contracts for 2015 but FMC had objected, saying that it would not allow new contracts unless FTIL completes the sale of stake to Kotak Mahindra Bank.

In a letter to MCX, the regulator said, "MCX can launch contracts up to March 2015 as soon as a new technology agreement is signed between MCX and FTIL."

This is being done in view of the fact that signing such an agreement is a pre-condition for the sale of shares from FTIL to Kotak Mahindra Bank. "It is expected that the divestment will be completed by FTIL soon after signing of the technology agreement," it said.

FMC also said, "The MCX can launch all its contracts for the year 2015 once the full divestment by FTIL in MCX takes place in compliance of the order of the commission dated December 17, 2013."

FMC said it has received representations from market participants to permit the launch of fresh contracts in MCX to ensure continuity of trading and hedging on the platform.

MCX is also directed to vigorously take all pending actions on the findings of PwC Report and furnish an updated compliance report by 15 October, it added.

MCX is India's first listed, national-level, electronic, commodity futures exchange, and is recognised by the government of India.