MCX Stock Exchange (MCX-SX) continued its tirade against the Securities and Exchange Board of India (Sebi), alleging "discrimination" and "character assassination" while rejecting its application for launching a full-fledged stock exchange.
Last week, Sebi rejected the application of MCX-SX for starting an exchange offering equity and equity derivatives, interest rate futures and a separate platform for small and medium enterprises (SMEs).
In a press briefing, MCX-SX Managing Director Joseph Massey said the Sebi order clearly showed the regulator had discriminated between existing exchanges, leaving a lot of unanswered questions.
"Quite a few points we raised have not been addressed," said Massey, He said the regulator allowed "one of the exchanges to continue functioning even while it was not fully compliant with MIMPS". This is the Manner of Increasing and Maintaining Public Shareholding in Recognised Exchanges guidelines and prohibits certain categories of investors from holding more than five per cent in a stock exchange. It was cited as a prime reason for denying MCX-SX.
"The damage that is being done to the reputation has been done... Attempt to character assassination has been achieved," said Massey.
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Sebi’s order had said it was "not satisfied that it would be in the interest of trade and also in public interest to allow the application", while using words like "dishonest" and "withholding information".
The MIMPS issue has gained significance since the exchange took an unprecedented step of filing a petition in the HC against Sebi for allegedly sitting on its application.
When asked whether the exchange was mulling a defamation suit against the regulator, Massey said “the company is well within the rights to do anything...Justice was not done either during the entire process of compliance or even after that”.
The exchange will “soon” decide on the forum to challenge the Sebi order. “There are two appellate forums (SAT and the Bombay HC)... Both the options are open and we will go by the advise of our lawyers. It will have to be soon enough,” said Massey. The exchange has 45 days to appeal.
Harping on the issue of discrimination, Massey said his exchange was not allowed to launch interest rate futures (IRFs) in 2009 for being MIMPS non-compliant, even as the “dominant exchange” managed to get the approval, though it was also non-compliant. The obvious reference was to the National Stock Exchange (NSE).
“When I questioned the Sebi official, he said ‘I had kept three permissions ready, I was told to give only two’,” alleged Massey. “This dual stand has done us serious problems,” he added, while criticising Sebi for “regulatory inadequacy”.
He also alleged that while NSE was given four years for MIMPS compliance, with no prohibition from launching new products, MCX-SX was prevented from entering new segments within a year.
When questioned about the manner the exchange’s capital restructuring had been done, Massey said a Sebi official did hint to him once that “technically, it is not in spirit”, even as “legally there is nothing wrong”.
“That was after we filed the writ petition in the high court,” he added.