Zee Media Bureau/Tarun Sharma
Mumbai: The Metropolitan Stock Exchange of India Ltd (MSEI), formerly known as MCX Stock Exchange Ltd (MCX-SX), plans to shut its clearing corporation and tie up with another exchange for handling the trade clearing services. MSEI has already written to the Securities and Exchange Board of India (Sebi) for seeking regulatory approval.
MSEI, whose licence to function as a stock exchange will come up for renewal in September, has been facing liquidity issues for quite some time and the latest move is believed to be on account of the high networth requirements as laid down by the capital market regulator.
According to Sebi norms, every clearing corporation has to have a minimum net worth of Rs.300 crore while stock exchanges need to maintain a net worth of Rs.100 crore. MSEI has been struggling hard to comply with its own networth issue and a separate corpus of Rs.300 crore for a clearing corporation would be difficult to achieve at this juncture.
In July, MSEI raised around Rs.75 crore through a rights issue. It had aimed to raise a total of nearly Rs.119 crore but fell short of the target. The statement released by the exchange had said that the bourse was in talks with certain private investors to get the remaining part of the issue subscribed.
It also said that the rights issue has helped the exchange to increase its net worth to more than Rs.225 crore. Sources said that the exchange was planning to use the money to boost the networth of its clearing corporation but the lukewarm response from investors forced it to change its strategy.
MSEI reported a loss of Rs.60.12 crore in the year ended 31 March 2015. In the previous financial year, the exchange registered a loss of nearly Rs.155 crore.
While Sebi has already ordered MSEI to comply with all the requisite networth requirements, the regulator will have to take a call on the issue of clearing corporation.
MSEI has written to BSE's Indian Clearing Corporation Ltd (ICCL) and NSE's National Securities Clearing Corporation Ltd (NSCCL) for a potential tie-up with the clearing houses. Sources, however, say that BSE and NSE are yet to decide on the matter.
The exchange has been facing difficult times ever since the settlement scam at the National Spot Exchange Ltd (NSEL) came out in the open in July 2013. The exchange was subjected to a forensic audit and there was a big reshuffle among the top management as well.
While the exchange does offer trading facilities in equity, only the currency segment sees some notable activity. On most days, less than Rs.3,000 crore worth of trades are registered in the currency segment, which would be around 10% of the total currency derivatives market turnover. This is a steep fall since the exchange boasted of nearly 45% market share till a couple of years back.
