Regulations
Financial Technologies, snubbed by the Indian regulatory system, gets fairer treatment in Singapore and Mauritius

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.
 

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COMMENTS

Shadi Katyal

7 years 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

prashant

7 years ago

long live FT.
SEBI you are doomed in court of law..be fare.

FSDC will sort out all inter-regulatory issue: PFRDA

New Delhi: Interim pension regulator Pension Fund Regulatory and Development Authority (PFRDA) today exuded confidence that the proposed Fiscal Stability and Development Council (FSDC) will resolve all inter-regulatory issues, reports PTI.

"We have to see how it (FSDC) functions, but I have absolutely no doubt that it will be able to sort out all the inter-regulatory issues," PFRDA chairman Yogesh Agarwal told reporters on the sidelines of a function organised by the PHD Chamber of Commerce here.

PFRDA is proposed to be one of the members of the FSDC along with other financial sector regulators —Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Insurance Regulatory and Development Authority (IRDA).

The body, to be set up soon, will be headed by finance minister Pranab Mukherjee.

Earlier, RBI had expressed reservations that regulators autonomy may be breached by FSDC.

To allay the central bank's fears, the finance ministry had recently decided that the RBI governor will head a sub-committee of FSDC.

Recently, finance minister Pranab Mukherjee had also denied that FSDC would be a super-regulator.

"Let me say clearly that FSDC will not assume the role of super regulator. The existing regulators will enjoy the powers as vested by (respective) Acts," Mr Mukherjee had said.

Noting that an air has been created that FSDC would take the role of a super regulator, he had said, "This is not so."

The purpose of setting up the FSDC, Mr Mukherjee had explained, was to coordinate the work of various financial sector regulators — RBI, SEBI, IRDA and PFRDA.

The finance ministry proposes to shortly announce the framework of FSDC, which will be headed by the finance minister.

Mr Mukherjee had further said that such a council was necessary to resolve conflict among different regulators.

"Certain things are necessary for smooth running of the system," he added.

The basic objective is to provide stability for a healthy development of the financial sector, he had said, adding the FSDC will have representatives from the concerned quarters.

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Monday Closing Report: Bulls try to fight back

The Indian market, which traded in the negative zone for a major part of the day, sprang a surprise to recoup in the last half-hour and close with little gains.

The market opened weak this morning on lacklustre global cues. The pre-open call option, introduced by the stock exchanges today, witnessed contrasting trends. While the Sensex opened in the red, the Nifty opened with gains. However, trends normalised after regular trade began.

Opening with marginal gains, the market soon dipped into the red on profit taking. A sharply volatile session saw the indices trade in a narrow range in the negative terrain till the post-noon session. A green opening of the key European markets gave the much-needed boost helping the domestic market closing near the high-point of the day.

The Sensex finally ended the day up 43.84 points (0.22%) at 20,169. The index touched a high of 20,229 and a low of 19,870, dipping below its psychological level of 20,000. The Nifty settled at 6,088, up 25.30 points (0.42%). The benchmark touched an intraday high of 6,115 and a low of 5,985, below the 6,000 mark.

The market breadth was a mixed bag today. The Sensex closed with 17 losers and 13 advancing stocks while the Nifty settled with 28 stocks in the positive zone while 22 ended lower. The broader indices underperformed the key barometers today. The BSE Mid-cap index tanked 0.47% while the BSE Small-cap index shed 0.15%.

The top Sensex gainers were TCS (up 2.98%), NTPC (up 1.70%), Tata Steel (up 1.56%), ONGC (up 1.42%) and Larsen & Toubro (L&T) (up 1.19%). Today’s laggards included ACC (down 2.86%), Bharti Airtel (down 2.21%), Jaiprakash Associates (down 1.80%), Tata Power (down 1.61%) and Cipla (down 1.54%).

The sectoral space was dominated by BSE IT (up 1.28%), BSE Oil &Gas (up 0.84%) and BSE Realty (up 0.72%). The sectoral losers included BSE Consumer Durables (down 1.02%), BSE Fast Moving Consumer Goods (FMCG) (down 0.18%) and BSE Power (down 0.17%).

The country's two premier bourses — National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) — today introduced the 15-minute special pre-open trading session, a mechanism under which investors can bid for stocks before the market opens. The mechanism, known as 'pre-open session call auction', will last for 15 minutes (from 9:00-9:15 am).

While, this system has been started to reduce the quantum of volatility — typically visible in the first few minutes of trade — but going by the first day's action this special session was more volatile than the normal trading session.

Markets in Asia ended in a sea of red on concerns about the pace of the global economy recovery. The stronger dollar led to easing of commodity prices, impacting material stocks in the region. The foreclosure crisis worrying US mortgage lenders and servicers also weighed on the region’s banking stocks.

The Shanghai Composite was down 0.54%, Hang Seng was down 1.21%, Jakarta Composite was down 0.84%, KLSE Composite was down 0.61%, Nikkei 225 was down 0.02%, Straits Times was down 0.72%, Seoul Composite was down 1.41% and Taiwan Weighted tumbled 1.76%.

India will launch its first-ever offer of shale gas areas for exploration by end 2011, even as it targets at least a billion dollar of investment commitments from the ongoing auction of conventional oil and gas blocks.

Speaking at a roadshow organised to promote 34 oil and gas blocks offered in the 9th round of New Exploration Licensing Policy (NELP), oil secretary S Sundareshan said potential of shale gas in India is being examined by oil regulator Directorate General of Hydrocarbons (DGH).

The US markets ended mixed on Friday with financial stock tanking the most. Stocks rose in early trade after Federal Reserve chief Ben Bernanke’s statement but tardy economic data results in the indices paring their gains. Mr Bernanke made a case for the central bank to take new initiatives to spur economic growth, stating that inflation is likely to remain below the Fed's 2% target and the economy is on a course to grow too slowly to bring down unemployment. His comments were seen as confirmation that the Fed will likely announce after its 2-3 November meeting that it will resume buying US Treasury bonds.

The Dow lost 31.79 points (0.29%) to 11,062. The S&P 500 gained 2.38 points (0.20%) to 1,176. The Nasdaq added 33.39 points (1.37%) to 2,468.

Institutional investors — both foreign as well as domestic — were net sellers of stocks on Friday. Foreign institutional investors offloaded stocks worth Rs112 crore and domestic institutional investors sold equities worth Rs1,053 crore.

Anil Ambani group company Reliance Communications (RCom) (up 0.11%) has added two million wireless subscribers both on its GSM and CDMA platforms in September, taking its total customer base to over 117 million.

According to the Telecom Regulatory Authority of India (TRAI), in August 18.18 million new users were added, taking the total wireless subscribers in the country to 670.60 million. TRAI is yet to release the overall September figures.

Powersoft Global Solution (up 2.70%) has launched the first automated, off-the-shelf, radio frequency identification (RFID) solution for small and medium enterprises. The offering is an integrated approach to RFID tracking. The solution includes three components, several new versatile UHF RFID tags, three new UHF Gen 2 hand-held readers and RFID Manager, an RFID software solution.

The company’s RFID solution is a valuable option for any business in the SME sector seeking to implement affordable data synchronization and RFID tracking.

Sterlite Industries (down 1.12%) has won a reprieve till mid-December on closure of its copper smelting plant, with the Supreme Court asking the Centre and the Tamil Nadu government and pollution control authorities to state why action was taken against the company.

Hearing Sterlite’s plea that the Madras High Court has ordered closure of its plant in Tuticorin despite compliance with green norms, the apex court issued notices to the Centre, the Tamil Nadu government and the Tamil Nadu Pollution Control Board.

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