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Nudged by the Forward Markets Commission (FMC), Multi Commodity Exchange (MCX) has written to five institutional shareholders to nominate their representatives on the exchange’s board.
Requests have been sent to IFCI, Bank of India, Union Bank of India, Corporation Bank and HDFC Bank. Once the proposal is implemented, Financial Technologies, which has been controlling the exchange, is likely to have just one board seat.
Officials in the know said the move was independent of the regulator’s show-cause notice to the three Financial Technologies Group directors-—Jignesh Shah, Joseph Massey and Shrikant Javaglekar.
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“Once these directors are appointed, MCX would have six institutional nominees, as one director representing Nabard is already there. Eventually, Financial Technologies will have only a single director in the board,” said a senior regulatory official familiar with the development.
The exchange’s board would have 14 directors, seven of whom would be independent ones. FMC wants institutional representatives be nominated for non-independent executive roles. Executive directors would be involved in the day-to-day running of the exchange.
The restructuring is likely to give the Centre indirect control over the exchange’s affairs, with five of the six institutional investors---Nabard, IFCI, Bank of India, Union Bank of India and Corporation Bank — under the administrative control of the finance ministry.
Also, three of the seven independent directors would be nominated by FMC. Traditionally under the control of the consumer affairs ministry, FMC affairs have recently been brought under the finance ministry’s ambit.
In response to an email seeking comment, an MCX spokesperson said, “FMC has given revised guidelines to reconstitute commex boards. In order to meet its guidelines, we are in the process of reconstituting the MCX board and have asked institutional shareholders to nominate board representatives.”
The regulator’s move is aimed at insulating the regulated MCX from the troubles of National Spot Exchange Ltd (NSEL), which has run into a Rs 5,600-crore payment crisis. “The restructured board is likely to bring in a new management and take corrective steps wherever there are issues,” said the official quoted earlier.
According to the latest shareholding pattern, Financial Technologies, the promoter of NSEL, holds 26 per cent in MCX. A few industry officials said this holding would give Financial Technologies a quarter of the non-independent board seats — two directors out of seven. But Financial Technologies would still be a minority on the board. With 26 per cent stake, however, the group would be able to block special resolutions, as company law provisions require a three-fourths majority for a special resolution to be passed.
IFCI holds 4.79 per cent stake in MCX. With 3.06 per cent stake, Nabard is the second largest shareholder among state-owned institutions. While Corporation Bank owns 2.95 per cent, Bank of India, Union Bank and HDFC Bank hold about one per cent each.
