MUMBAI: The Bombay high court on Wednesday ruled in favour of MCX stock exchange against Securities and exchange board of India’s (SEBI) decision to prevent MCX form trading in derivatives and other products.
“We are setting aside the order passed by SEBI on September 23, 2010. SEBI is directed to reconsider MCX’s application afresh within a month after considering the observations made by this court,” Justice D Y Chandrachud and Anoop V Mohta said. The court passed the order after hearing an appeal filed by MCX-SX in October 2010 against SEBI for rejecting its application to set up a new equities trading platform.
SEBI had passed an order on 23 September 2010 refusing permission to MCX to trade in interest rates, derivatives, equity, futures and options on equity, wholesale debt segments and all other segments that other stock exchanges, such as the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) were allowed to operate in.
In the last hearing in November 2011, the High Court had reserved its judgement after the two parties, SEBI and MCX—SX, were unable to sort out the matter out of court.
SEBI had found MCX-SX non-compliant with ownership norms in 2010 and objected to the manner in which MCX-SX promoters Multi Commodity Exchange of India Ltd (MCX) and Financial Technologies (India) Ltd (FTIL) pared their stakes in the exchange by issuing warrants to banks and financial institutions, and found them acting in concert.
“During the proceedings before SEBI and the High Court, undertakings have been filed by MCX promoters to the effect that the provisions of Mimps regulations, including the ceiling on the holding of the shares would be complied with,”the court noted. Stating that ‘the relationship between a stock exchange and SEBI is one based on trust and utmost faith’ the court said that, “The company is duty bound to make full and honest disclosure of all material facts.”