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Another MCX-SX victory PDF Print E-mail
Thursday, 15 March 2012 02:22
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HC backs MCX-SX, but MIMPS needs a relook

After being at the receiving end for more than a year, MCX-SX and its promoters are having an amazing streak of good luck. MCX-SX won a case against rival NSE and the Competition Commission of India even fined NSE R55.5 crore for indulging in anti-competitive practices; MCX-SX promoter MCX had a dream IPO; and now the Bombay High Court has set aside the Sebi order on it and directed Sebi to reconsider its application to be allowed to trade additional products on its exchange including equity trading. In setting aside the order, the high court has said Sebi was wrong when it said MCX-SX’s promoters were just fulfilling the letter of the MIMPS law and not its spirit—Sebi said that since MCX-SX’s promoters had entered into buyback arrangements with other firms when it diluted equity in their favour, this was violative of the law. How this was so was never clear since, even if there were buybacks, under MIMPS, MCX-SX’s promoters could never hold more than 5% each in the exchange—so all the buybacks did was to get them some more time till they found new buyers for the equity.

The larger issue of MIMPS, however, remains and this needs to be fixed. Under MIMPS, no one can hold more than 5% of a stock exchange, making it impossible for a well-capitalised exchange to come up. Since Sebi realised an anchor investor was needed, exceptions were made for banks, stock exchanges, depositories, etc, which could hold 15% equity. Why only them is still not clear, and in any case other financial regulators like RBI keep promoter equity at a minimum of 40% and allow even 100% to begin with; commodity exchanges allow a minimum of 26% with no ceiling. The Bimal Jalan Committee appointed to look into MIMPS, sadly, just raised the 15% ceiling for select investors to 26% and left it at that (http://bit.ly/ycx20y); even listing of stock exchanges was not permitted while banks are allowed this. At some point, sooner rather than later, MIMPS needs to be revisited.

 

Last Updated ( Thursday, 15 March 2012 02:23 )
 

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