Faced with a Sebi order to improve its governance structure, MCX Stock Exchange has set up a high-level committee to oversee its key functions, including top-level appointments and significant financial matters.
A similar committee has been set up by the MCX-SX Clearing Corporation as well to ensure compliance with a Sebi order issued on September 12 in the wake of a Rs 5,600-crore payment crisis at group entity National Spot Exchange (NSEL).
The committees would advise boards of the two entities on major policy matters and ensure all regulatory compliance.
MCX-SX has also called an Extra Ordinary General Meeting (EGM) of its shareholders on October 9, wherein their approval would be sought on "the status on conflict of interest and compliance" with the relevant Sebi regulations by directors and the key management personnel including managing director, pursuant to the latest Sebi order.
The commiteee would brief the MCX-SX shareholders on this matter at the meeting, the exchange said in its EGM notice.
While renewing MCX-SX's recognition as a stock exchange for another year, commencing from September 16, Sebi has asked MCX-SX to constitute a committee of two independent directors and three institutional investor nominees to oversee key business decisions, policy matters and appointments of top management personnel.
Similar directions were issued to its subsidiary, MCX-SX Clearing Corporation Limited (MCX-SXCCL), as well.
"The boards of MCX-SX and MCX-SXCCL have constituted the committees as required in terms of the Sebi renewal letter dated September 12, 2013. We have kept Sebi informed of the same," a spokesperson for the bourse told PTI in reply to queries in this regard.
However, the exchange refused to share the names of the committee members despite repeated attempts.
MCX-SX Ltd is promoted by Financial Technologies Group which also runs spot commodity exchange NSEL, which has been engulfed in a crisis when it stopped trading on all contracts on July 31 following government directives.
MCX-SX began operations as a full-fledged stock exchange in February this year, but trading volumes of the exchange has been quite low as compared to rivals BSE and NSE. The exchange has got the licence after a months-long battle with Sebi within and outside the court.
While Sebi decided to renew its license despite continuing troubles at NSEL, which has defaulted on at least five payments so far, the regulator asked MCX-SX to work towards strengthening its governance practices.
Sebi has also warned that the licence can be withdrawn in case of any non-compliance to its directions, including about the setting up and functioning of the governance committee.
This panel will oversee the exchange's financial transactions related to investment, lending, and borrowing of funds and related party transactions, appointment of key management personnel, all facility/infrastructure sharing arrangements and major capital expenditures.
As per Sebi order, the panel would advise MCX-SX board on all the major policy matters and the board will have to consider the advice of the panel and maintain a record of the proceedings.
In order to further secure the management of the exchange and clearing corporation, shareholders of MCX-SX and MCX-SX-CCL in AGM/EGM would examine conflict of interest and compliance with Stock Exchanges and Clearing Corporations (SECC) Regulations by the directors and the key management personnel and take appropriate action including reconstitution of board, reappointment of any key management personnel.
This will have to be reported to SEBI within 30 days from the date of renewal of recognition.
Sebi said any non-compliance with its directions or any adverse findings by any other regulator may result in withdrawal of recognition of the exchange.
MCX-SX offers electronic platform for trading in Capital Market, Futures & Options, Currency Derivatives and Debt Market segments. The exchange has also received in-principle approval from SEBI for operationalising SME trading platform.