This Diwali, MCX-SX all-set to give BSE, NSE run for money

Come Diwali, India will have a third equity trading platform. After a two-year long battle that saw MCX-SX go all the way to the Supreme Court, SEBI has finally given the exchange conditional approval. MCX-SX is now gearing up for the next step and it’s not going to be easy, reports Sajeet Manghat and Animesh Das of CNBC-TV18.

Sajeet Manghat, Reporter, CNBC-TV18

Jignesh Shah, vice-chairman, MCX-SX, says that we will do in toto what the regulator said.


A pithy end to a two-year long regulatory battle that was fought on multiple battle-fields, including the Supreme Court, MCX-SX has finally received the go-ahead to deal in interest rate derivatives, equity, equity derivatives and the wholesale debt segment and it will now take on established players like BSE and NSE. But the conditional SEBI nod means that the exchange’s promoters FT, and MCX have 18 months to reduce their combined stake to under 5%.


“FT hold 5%, MCX the commodity exchange will also hold 5%, now the combined stake will be 5% or cut down to 5%,” says Shah.


MCX has to reduce its entitlement to warrants via divestment within three years. Starting September 2012, it also has to submit, a quarterly status report on the divestment of equity and warrants. Operationally, it will have to raise capital, either via equity, internal accruals, or other options, for future funding set-up a clearing corporation and a depository.


However, for now, its current net worth of Rs 250 crore is enough to start operationing in new segments. The more immediate problem will be enrolling members to its segments.


Joseph Massey, MD & CEO, MCX-SX, says that there will be part, it will be a strategic call, partly it will be nuts and bolts issue, while the infrastructure continues to be state of readiness there are things that are time consuming. One of them happens to be getting members enrolled, registered and registration process happens to be for every segments. This is a finite time and I can say it will take couple of months before we launch other segments.


But MCX-SX is confident it will be able to change the dynamics of the equity markets, just like it did for gold futures.


“95% of the gold which was imported in India was 995, and hedgers require that perfect co-relation and that was the difference and we launched 995, others launched 999 within three months liquidity was here, then it got copied including the spelling mistakes,” says Shah.


The board of MCX-SX will soon meet to take its business plan forward and while MCX-SX will have to share these with the regulator as part of its monthly development report, the exchange is confident it will give BSE and NSE a run for their money.

(curtsey : money control)

Rupesh Yatesh Dalal
Head Research Department

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