Sucheta Dalal :SILENT SEBI
Sucheta Dalal

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August 10, 2010

On 20th July, the MCX-SX took the bold step of dragging SEBI to court because SEBI would neither grant it permission to trade in other segments nor reject its application

The Securities and Exchange Board of India (SEBI) is very aggressive and vocal on certain issues and maintains a Sphinx-like silence on certain others. On 20th July, the MCX-SX took the bold and unusual step of dragging SEBI to court. According to it, SEBI left it with no choice. The clock was ticking towards the September deadline when MCX-SX’s provisional recognition to trade in currency derivatives would expire, but when it went to SEBI to obtain permanent recognition and also permission to trade in equities, it apparently came up against a wall of silence.

SEBI would neither grant it permission to trade in other segments including equity, nor reject its application. It did not have any more queries either; MCX-SX had replied to all of SEBI’s queries. Instead, a select section of the media was spreading innuendos about how the regulator was not quite happy with MCX-SX having complied in letter and not in spirit.

Forced to counter these, MCX-SX issued an advertisement in all leading dailies explaining the sequence and every detail of the compliance. The ugliness of the battle is evident from the fact that certain newspapers even filed a Right to Information query, asking if Punjab National Bank’s (PNB) stake in MCX-SX had a buy-back clause.

Such a query could only have been triggered by a rival exchange. Whether or not PNB has a buy-back clause, or ends up with a better deal selling it to another shareholder, is hardly the stuff of national importance that would trigger an RTI query from a media house. Consider the National Stock Exchange (NSE) which has seen the entry and exit of several investors at huge valuations even though the bourse has no plans to list its shares. Even the New York Stock Exchange, which was among the original shareholders, has exited the NSE.

But issuing an advertisement, with the support of a high-profile board of directors and advisors, wasn’t going to solve anything. Given SEBI’s track record of inaction and with time running out, approach the courts seemed the only alternative.

Isn’t it ironical that while SEBI was proactive enough to encroach on the insurance regulator’s turf, its own regulated entities have been forced to approach the courts because of its arbitrary silence which, according to market intermediaries, is aimed at keeping strong competition out of the market. It is, of course, obvious who stands to gain the most if SEBI keeps MCX-SX hanging and is, ultimately, forced to die. Let’s not forget that MCX is by far India’s leading commodity bourse and MCX-SX has beaten the NSE fair and square in currency derivatives, despite NSE’s muscle power and carefully cultivated image
. — Sucheta Dalal

-- Sucheta Dalal