MCX-SX moves court against Sebi over delayed grant
By siliconindia   |   Wednesday, 21 July 2010, 23:26 IST
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Mumbai: After waiting for three months for the stock market regulator to clear its application seeking permission to serve as a platform for trading in equities and with time running out, MCX Stock Exchange (MCX-SX) has moved the Bombay high court for relief, reports N. Sundaresha Subramanian & Anirudh Laskar of Mint. Neither the spokesmen for MCX-SX nor the Securities and Exchange Board of India (Sebi) were available for any comments on this. Sources familiar to the MCX-SX said the exchange, currently permitted to operate in the currency derivatives segment, had been writing to Sebi for a year, but that the regulator had not responded despite the exchange complying with MIMPS (Manner of Increasing and Maintaining Public Shareholding in Recognized Stock Exchanges) regulations. "Therefore, the company has moved the Bombay high court under the writ jurisdiction seeking that the regulator must be mandated to dispose of the case (approval for new products)," added this person, who spoke on condition of anonymity. MIMPS specifies the mandated and preferred shareholding pattern in stock exchanges. MCX-SX had effected a capital restructuring in April to meet the norms and communicated this to Sebi. Sebi had granted MCX-SX a licence till 15 September 2009 on condition that it met MIMPS regulations. This was later extended to 15 September 2010. A finance industry executive, who helped set up an exchange with which MCX-SX would have competed had it received permission to operate in the equities segment, said Sebi's inaction may have been prompted by the way MCX met regulatory norms. "Compliance means both in terms of letter and spirit. If an exchange cannot comply with the norms completely, it should not get a license simple," added this person, who did not want to be identified. A Sebi official confirmed this last week and said the regulator isn't 'comfortable' with the way the company restructured its equity through warrants and that it had conveyed its reservations to MCX-SX, although it hadn't written the exchange a letter to this effect. The official, who asked not to be identified, said MCX-SX had followed the norms in 'letter', not 'spirit'. MCX-SX's move comes in the wake of a high-intensity public campaign launched by the company last week lashing out at Sebi and unnamed rivals. The person familiar with happenings at MCX-SX said the company's stand was that the regulator's inaction was affecting the marketability of the exchange. He said MCX-SX was like "a taxi operator who can operate only route in which there is a bus operator running free services." He added the taxi operator could not stay in business unless it got new routes. Legal firm J Sagar Associates represents the exchange in the case.

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