)
Following new norms issued by the the Forward markets commission (FMC) on constitution of the board of national commodity exchanges, leading exchange Multi Commodity Exchange (MCX) has decided to reconstitute the board. FMC had fixed the age of 70 as upper limit for chairman and independent directors and the exchange’s chairman Venkat Chary and an independent director C.M. Maniar are above 70 years.
The exchange is understood to be calling a meeting of its board in the month end to fill the vacancy being created as a result of complying with the FMC norms. The exchange will also appoint a new chairman.
Venkat chary happens to be a former chairman of the FMC while Maniar is leading chartered accountant.
The exchange is also facing investors ire as its share price has nosedived in the current month with over 60 per cent erosion and now NSEL, a spot commodity exchange floated by the MCX’s promoter company Financial Technologies has defaulted which is feared to impact MCX. Some of the institutional investors have raised the fears on impact on MCX following FMC threatening NSEL board that they may lose their fit and proper status. FMC last week wrote the NSEL board that, there seems to be “complete failure of the system at NSEL and which in turn reflects the complicity and / or incompetence of the Board members to govern an exchange.” FMC further warned the NSEL board that,
“Your status as a ‘fit and proper’ person is at serious risk and may lead to consequential actions. The Board should take complete responsibility for the completion of settlement of all outstanding trade at NSEL.”
If board loses fit and proper status that the board members including Jignesh Shah who is vice chairman and promoter of MCX’s parent FT group will also have to resign from the MCX board as FMC norms will not allow him to be on the MCX board also.
This directive had raised fears about what could happen to MCX in the minds of some FIIs and PEs including domestic institutions. At the same time FMC’s May guidelines warrants MCX to replace chairman.
Following this developments MCX institutional investors have sought time with FMC and they are meeting the regulator tomorrow, said the source familiar with the development.
These investors also seeking clarity from the FMC as to what could happen if the NSEL board members lose fit and proper status. Will FT group continue to remain promote of the exchange? some have seen possibility of a deal if FT is compelled to sell stake. However things are not as simple because whoever buys FT’s 26 per cent stake will have to come out with an open offer.
