Financial Technologies, snubbed by the Indian regulatory system, gets fairer treatment in Singapore and Mauritius
Moneylife Digital Team 18 October 2010

MCX-SX, promoted by Financial Technologies, was prevented from launching equities trading in India. But it faced no troubles in launching two new exchanges in six weeks, first in Singapore and then in Mauritius

Three weeks after the Indian regulator Securities and Exchange Board of India (SEBI) decided to throw out the application of MCX-SX to launch equity trading, today on 18th October, the Global Board of Trade (GBOT), the first international multi-asset class exchange based in Mauritius, has gone live. GBOT has been promoted by Financial Technologies, promoter of MCX and MCX-SX.

GBOT will offer a basket of commodity derivative products including metals, energy, soft agricultural products, as well as currency derivatives. The launch of GBOT makes it FT's second exchange launch within a space of six weeks. Its latest success not only consolidates its lead as the leading exchange group from Asia but holds a mirror to the Indian regulatory system which denied MCX-SX an equity trading platform.

GBOT was inaugurated on 16th October by Dr Navinchandra Ramgoolam, prime minister of the Republic of Mauritius. It is instructive to hear what Dr Ramgoolam said during the launch: "GBOT has the advantage of having Financial Technologies India Ltd as (the) parent company. Mr Jignesh Shah is a bold entrepreneur with exceptional business acumen. FT has chosen Mauritius after careful and rigorous analysis for setting up a multi-asset exchange."

Mauritius considered it a privilege to have FT as a partner, which it chose "after careful and rigorous analysis." In sharp contrast, consider how SEBI treated the FT group, which is setting up exchanges in a vast swathe of countries from Africa to Asia and Middle East to South East Asia. After granting it the permission to launch a currency exchange in August 2008, SEBI officials have strung along FT-promoted MCX-SX for two years with the promise of clearing its application for equity trading. During this period, MCX-SX was bleeding, since its key rival, the highly profitable National Stock Exchange, was running its currency exchange for free. Later, SEBI allowed NSE to launch other currency products while refusing MCX-SX the same permission. This prevented MCX-SX to broad-base its shareholders and bring down the promoters' holding. To deal with this, MCX-SX had to reduce its capital to comply with SEBI's shareholding norms for exchange ownership. This move was followed by a deafening silence from SEBI, forcing MCX-SX to approach the High Court for a quicker decision, especially since MCX-SX was living on temporary license for the currency segment. Finally, on 23rd September, SEBI, which was dragging its feet all these years, threw out MCX-SX's application with a 68-page order with selective facts and dubious logic, laced with humiliating language. MCX-SX is now bleeding, running a currency exchange with no permission to expand into even currency options.

To make matters hotter for it, SEBI has cleared the launch of a third currency exchange, the United Stock Exchange, without bothering about the possibility that USX is likely to die an early death, because it has no revenue model. Interestingly, neither SEBI, nor RBI or USE have responded to our queries on how USE hopes to earn revenues, make money and survive. This will leave NSE with a monopoly in the currency segment, with SEBI's help, and without having to compete for its monopoly position. Ironically, while MCX-SX cannot expand any more in India, GBOT will offer currency derivatives products such as USD/MUR, ZAR/USD, EUR/USD, GBP/USD and JPY/USD futures. For the first time worldwide, two African currency futures will be traded.

Given the flow of events, FT and MCX allege, with some justification, that SEBI's approach all along has been to throttle MCX-SX's business itself. The beneficiary of this is the National Stock Exchange, which controls 94% of equity market trading in India. Indeed, the successful launch of exchanges in Singapore and Mauritius raises valid questions about SEBI's motive as far as dealing with MCX-SX is concerned. While Singapore is a far more advanced financial centre than India, given its quality of institutions, governance standards and quality of regulation, Mauritius too is a key financial centre through which billions of dollars flow. The Indian government, SEBI and RBI do not have a problem with such equity fund inflows into India through Mauritius, which have boosted Indian markets to almost their all-time highs and are the cause of huge trading volumes on the NSE.

Having successfully launched two new exchanges in quick succession in two important locations in Asia, FT may well feel victimised in its home base especially since the group operates 10 exchanges and six related ventures which include clearing, depository, information vending, and payment gateway among others.

Shadi Katyal
1 decade ago
Why is anyone surprised with such news. I have written before that we are shooting ourselves in the foot and feel no pain.India evidently is not in touch with the reality of times and ever since Nehruvian economic development,nothing has changed.Our RED TAPE and Bureaucracy rules the day. we have more road blocks to destroy the nation and reason is simple ,immaturity and insincerity plus inferiority.
Has any NRI seen the documents asked by banks to open an account in India. Except photo of your being born every other document is required and that is when you wish to deposit your funds in India.
When will we reach 21st century only our Babus know
1 decade ago
long live FT.
SEBI you are doomed in court of fare.
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