SC tosses MCX-SX ball back in Sebi’s court

The Supreme Court has asked the Securities and Exchange Board of India to reconsider MCX-SX’s application to start an equity platform.

It has given the regulator three months to do so.

Sebi had moved the apex court after Bombay High Court set aside its rejection of the MCX-SX application.

The bench comprising justices Aftab Alam and C K Prasad asked Sebi not to be influenced by various observations made by the Bombay High Court in its judgment, according to a PTI report.

According to the report, the apex court passed the order on the basis of a consensus, reached between Sebi which was represented by Attorney General GE Vahanvati and MCX-SX represented by Harish Salve.

The bench passed its order after Vahanvati told it that Sebi would amend the MIMPS (or manner of increasing and maintaining public shareholding) rules within three months, while Salve assured it that MCX-SX was willing to abide by the proposed amended rules.

Since the high court order, the regulator has decided that its earlier objections with regard to the warrants should also be made law, albeit allowing the exchange three years to meet the requirements.

Sebi has decided to disallow any entity from holding more than the prescribed shareholder limit in exchanges, even if the holding is indirect such as through rights or warrants.

The decision can take anything from a few days to months or even a year to appear as a gazette notification, which would make it law, according to a person familiar with such matters.

The three month period could thus also be used to allow the regulator enough room for a complete relook of the MCX-SX application.

The exchange seemed to claim the field in the court battle, according to a statement sent to the press.

“We always had full faith in our regulatory and judicial institutions and systems. We remain committed to the growth and development of Indian capital market which has a significant role to play in the overall development of the economy.”

The change in regulation closed the loophole that allowed the promoters of MCX-SX to retain interest in the company through warrants, but allowed them the time to sell off the warrants.
Perhaps if a similar balance is applied over the next three months, it may not be so much advantage MCX-SX, as it may be deuce.

— With PTI inputs