Amid NSEL crisis, MCX-SX begins search for new CEO

MCX Stock Exchange (MCX-SX) has begun its search for a new managing director and CEO to head the bourse, whose group entities remain embroiled in a major crisis emanating from Rs 5,600-crore payment default at the National Spot Exchange (NSEL).

The exchange was set up by Jignesh Shah-led Financial Technologies (FTIL) group, which has also promoted NSEL and commodity bourse MCX, among others.

Earlier this month, Joseph Massey resigned as MD and CEO of India's newest exchange while Shah also had to quit from its board.

In a public announcement on Monday, MCX-SX invited application from "suitably qualified and experienced" candidates for the post of Managing Director and CEO.

It is the country's newest stock exchange and began operations in currency derivatives segment from October 2008 while it commenced operations in capital markets trading in February this year.

MCX-SX said: "The candidate must be qualified in the fields of capital market, finance or management and possessing sufficient experience in related fields for at least 15 years."

The MD and CEO would report to the board of directors and would be responsible for conduct of affairs of the exchange under the direction and supervision of the board. He/she shall also be responsible to perform various functions under the bye-laws, rules and regulations of the exchange and also to comply with various statutory and regulatory requirements, it added.

The appointment will be subject to approval of Securities and Exchange Board of India (Sebi) and the candidate shall hold office for a term of three years which could be extended, the exchange said.

The candidate's age should not be more than 50 years as on October 31, it said adding that age and experience limits may be relaxed for deserving candidates at the discretion of the selection committee.

While renewing MCX-SX's licence for another one year, capital markets regulator Sebi had in September asked the exchange to set up a panel of independent directors to oversee its operations in the wake of questions being raised about 'fit and proper' status of its promoters.

After both Shah and Massey resigned, MCX-SX had said that U Venkataraman, whole-time Director, would assist the special committee of public interest directors in carrying out the functions of the exchange.

The group has seen a string of resignations in the past few weeks at its various entities.

Last week, commodity bourse MCX managing director and chief executive officer Shreekant Javalgekar also submitted his resignation.

Financial Technologies' exchanges abroad under lens

Laxity in enforcing KYC and allied norms suspected; money laundering gaps also on probe panel’s mind

The role of global exchanges floated by the Financial Technologies group has also come under the government’s scanner.

Several investors are said to be holding positions on the Multi Commodity Exchange, while the same investors were offered similar positions on international exchanges floated by the Financial Technologies group, to take arbitrage advantage. While these facilities were offered by brokers, the government is looking at whether there was any laxity on the part of these overseas exchanges floated by the FT group regarding Know Your Clients (KYC) or other processes.

If such linkages are found, that would be also considered violation of the foreign exchange and money laundering laws.

“The government is now looking at pare trades in FTIL-controlled exchanges NSEL, MCX and also exchanges owned by it outside India,” said a government official. The FT group had floated Bahrain Financial Exchange, Singapore Mercantile Exchange and Dubai Gold and Commodity Exchange. All these three have been offering gold contracts.

An FT spokesperson said, “We’ve not received any communication from any authorities/regulators on such investigations and, hence, cannot comment.”

A sector official said investors and traders having positions abroad without the knowledge of the Indian authorities had been happening and these also hold positions in other names, with US-based Comex and the London Metal Exchange being common destinations. In those exchanges, Indian authorities have no say but they are investigating this.

Officials in the know said one of the high-powered working groups constituted by the government on the NSEL crisis, headed by the RBI deputy governor, was looking into the possibility of money laundering among firms trading on this exchange, MCX and also exchanges in foreign lands controlled by FTIL. "All these possibilities are within the realm of the committee and working groups constituted by the government on August 26 and we are looking at the matter from every possible issue and involving all sister-concerns of NSEL," a senior official said.

The chain of exchanges, domestic and global, are under the scanner of other regulators as well, following the forward Markets Commission (FMC)’s warning to the NSEL board that their ‘fit and proper’ status was at risk. The warning was given by the regulator last week, after  NSEL defaulted on its commitment to make the first week’s agreed payout.

A former regulator told Business Standard, “Once the promoter loses s status as a fit and proper person to run the exchange, other regulators have to reconsider if promoters of the entities regulated by them have the same promoter that have lost this status. Global regulators  generally follow.” So, if the NSEL promoters lose their fit and proper status there, the commodity, stock and power exchanges set up by the same promoters might face similar action.

A source in FMC said, “The decision to withdraw the fit and proper status on the NSEL board of directors is under consideration and task forces appointed by the government will also look into it, as it has implications for other regulators, too.”