MCX Stock Exchange (MCX-SX) is all set to become India's third full-fledged stock exchange as it got license from the Securities and Exchange Board of India (SEBI) to trade in new asset classes, including equities, futures and options and other products.
MCX-SX, promoted by Multi Commodity Exchange (MCX) and Financial Technologies (FTIL) which at present is allowed to trade only on foreign currency derivates, will compete with the well-established Bombay Stock Exchange and National Stock Exchange.
The approval that came after four years of bitter court battles will allow MCX-SX to trade in equity and equity Futures and Options, interest rate futures and wholesale debt segments, apart from currency and currency derivates.
SEBI's approval came on the condition that the promoters should bring down their equity share capital of MCX-SX within 5 percent limit in 18 months. At present, MCX and Financial Technologies have a combined 10 percent stake in MCX-SX.
MCX & FTIL will have to reduce their entitlement to equity or rights over equity from instruments like warrants in excess of the shareholding as specified in the revised SECC regulations within a period of three years. The regulator has told them that the combined voting rights of FTIL and MCX in MCX-SX should not exceed 5 percent of the paid up equity share capital of MCX-SX at any point of time.
MCX-SX entry to the stock exchange space will escalate the competition, besides opening up a broader trading space for the investors in more asset classes in the country.
Reacting to the SEBI's approval, MCX-SX chairman Ashok Jha said that entry of the new stock exchange would create conducive environment for growth of all asset classes. The exchange is likely to be functional in the next couple of months. We will continue with our efforts of systematic development of markets and the financial market ecosystem, he said in a media statement.
MCX- SX got their license to trade in currency derivates in September 2008. MCX-SX's managing director and CEO Joseph Massey told CNBC that they planned to start currency options trading in a month and the timeline for the stock exchange to launch various operations would be announced post next board meet.
Though SEBI has recognized eight stock exchanges so far, only two of them- BSE and NSE - are operational.
India's third stock exchange is arriving at a time when the volatile market conditions have led to a slight dip in trade turnover of the NSE and BSE in recent years. NSE reported a net profit of 50 percent while BSE profit margin was around 35 percent last year, but their growth in core revenues showed a decline.
Financial Technologies was trading 4.40 percent higher at 786.55 and MCX was trading down 1.05 percent at 1145, after touching Rs 1212 earlier in the day.