Denied nod for full trading, MCX-SX goes SEBI-bashing

The Jignesh Shah-led MCX Stock Exchange (MCX-SX) on Friday publicly lashed out at the Securities and Exchange Board of India for not giving it clearance to become a full-fledged stock exchange, despite meeting all the conditions. It also slammed its competitors like the National Stock Exchange (NSE).

The bourse has put out newspaper advertisements saying that permission for doing full-fledged business - like trading in equities, equity derivatives, interest rate derivatives, mutual funds and the debt market among other instruments - is yet to come despite the MCX-SX being compliant to the regulations relating to shareholding pattern for stock exchanges.

MCX-SX also pointed out that it was in a peculiar situation where the regulator did not give it permission to launch any new product, but wanted it to divest equity to a wide base of investors. At the same time, prospective investors were not willing to buy stake in the exchange because there was no revenue.

Without naming the NSE, the advertisement also said that its rival bourse was killing competition since it offered currency derivatives for free, and MCX-SX was forced to do the same. "New investors wanted MCX-SX to have regulatory permission for all segments before investing, whereas SEBI wants divestments before giving approval for other segments," the advertisement noted.

In the public notice, the bourse said, "There have been attempts by some elements at spreading misinformation to create doubts among our shareholders and to undermine our reputation and business for their benefit."

MCX-SX said that a key condition for it to get permission for full-fledged stock exchange was to bring down promoters' stake and it achieved the same with a 'capital reduction cum arrangement' scheme, that also got approval from Bombay high court in March 2010.