10 August 2010

MCX on the cusp of getting equity exchange licence

Business Standard reports and more from CNBC that the Bombay High Court has ordered SEBI to decide on the application of MCX to start equity trading by the 30th of September. MCX had urged bias on the part of SEBI in favour of the NSE in its writ before the High Court. Apparently, the High Court while asking SEBI to decide has also directed MCX to ensure a board resolution stating its resolve to respect the 5% voting cap imposed by SEBI regulations and also some limit on execution of buy-back arrangements which it had with signed with banks for their stakes. It is quite clear that SEBI will now have to give MCX permission to launch equity trading - given that their application was pending for such a long time, it is unlikely there would be other issues which are outstanding. I would be very surprised if SEBI were to reject MCX's application after all these developments - though they are of course legally free to pursue such a course of action.

Are the banks going to be mighty upset with the restrain on the condition on non execution of buy-backs? Probably not - because if MCX get the license to trade, these shares are worth a lot and the banks can easily sell off the shares to third parties now.

Whatever else - equity trading will never be the same again with the NSE getting robust competition for the first time in a decade.

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