MCX Stock Exchange (MCX-SX), which is promoted by Jignesh Shah-controlled entities, has seen a drop in its turnover ever since the settlement crisis at the National Spot Exchange (NSEL) came to light.
Data show that all the three segments of MCX-SX – equity, equity derivatives (F&O) and currency derivatives — have seen volumes drop significantly since July, when it came to light that Shah-owned NSEL was facing a settlement crisis. NSEL suspended the settlement of all paired contracts on July 31, while e-series contract trading was also later suspended.
In the equity segment, October and September saw the turnover fall below the R1,000-crore mark. This is much lower than June when the bourse clocked in a volume of nearly R3,000 crore. Over 1,000 companies are available for trading on MCX-SX.
While the turnover has dropped in the other two national-level exchanges – NSE and BSE – as well, the drop in the case of MCX-SX has been much higher. Incidentally, MCX-SX started operations as a full-fledged bourse only in February this year and, so, the total volumes are much lower when compared to the other exchanges.
Market experts say the NSEL crisis — which is still showing no signs of abatement — has led to Shah's image taking a beating with many brokerages gradually reducing their activity on the bourse. They say some of the leading brokerages have burnt their fingers in NSEL and are maintaining distance from his other ventures, including MCX, the commodity futures exchange.
“Many brokerages have cut down on their activity on MCX-SX. It does not impact the business as the exchange is new and there is not much liquidity,” said the head of a domestic brokerage that lost money in the NSEL fiasco. “The derivatives segment is being driven by liquidity enhancement scheme but instead of national level brokers, it is the regional players that are more active in it,” he added, wishing not to
In the F&O segment, the turnover has dropped over 75% in October when compared to July. Till a few months back, contracts worth over R20,000 crore were traded in a single month, which has now dropped to less than R8,000 crore. NSE's F&O segment volume has fallen by 30% in the last few months.
Further, while July and August saw many days when the daily turnover was in excess of R1,000 crore, the recent past has seen the daily turnover hover in the range of R200 crore to R500 crore. Even the currency derivatives segment, which is seen as the most robust of all segments of MCX-SX, has taken a beating in the recent past. While even NSE has seen a corresponding fall in the turnover, the fall has been much more in the case of MCX-SX. From a high of R4.82 lakh crore, the total turnover has dropped to less than R1 lakh crore in October (till Oct 25). In each of the last three months, the drop in the turnover has been in excess
MCX-SX is not the only exchange promoted by Shah that is feeling the heat of the NSEL crisis. MCX has also seen a drop in the volumes though the introduction of commodity transaction tax (CTT) has also been a major factor behind that drop. Reports suggest that some brokerages have withdrawn or reduced the bank guarantees with the exchange (MCX), which implies a reduced commitment of trading with the bourse.