Mumbai: Market regulator Sebi on Tuesday granted permission to MCX-SX to operate as a full-fledged stock exchange, a development that ends nearly four-year-long wait of the bourse and will bring in more competition in markets.
MCX Stock Exchange (MCX-SX) was first granted recognition by Sebi in September 2008, but it was allowed to conduct trading only in the currency derivatives segment.
With the approval, MCX-SX would be able to offer additional asset classes such as equity and equity F&O (Futures and Options), interest rate futures and wholesale debt segments.
Welcoming the decision, MCX-SX Vice Chairman Jignesh Shah said: "We are thankful to the regulator and policy makers for effecting calibrated reforms that will foster a pro-competitive environment in India’s exchange industry."
"The new regulations have provided the much-needed level playing field. Allowing listing for stock exchanges will spur a transparent policy regime and encourage investments for market development and investor education," he added.
At present, Sebi has granted permanent recognition to eight stock exchanges in the country, but only two of them -- BSE and NSE (National Stock Exchange) -- are operating as active national level bourses across the segments.
MCX-SX and USE (United Stock Exchange) are present in the currency derivatives trade only.
With Sebi's latest decision, MCX-SX is likely to become the third major national-level full-fledged stock exchange.
The Securities and Exchange Board of India (Sebi) has been so far renewing MCX-SX's license for one-year periods, but has not been allowing the exchange to operate in segments other than currency derivatives, saying the bourse was not compliant to the shareholding and other regulations. Its last license was valid up to September 15, this year.

The promoters of MCX-SX, in their submissions and the undertakings to Sebi, have said that the shareholding of MCX and FTIL (the two promoters) would be brought within the 5 percent limit within 18 months from Tuesday.
The combined voting rights of FTIL and MCX in the stock exchange would not exceed five percent at any point of time, the promoters have told the regulator.
MCX and FTIL would reduce their rights over equity arising from instruments like warrants to within the shareholding limit as specified in the revised Sebi regulations within a period of three years.
MCX is the country's largest commodity exchange, while its promoter FTIL offers technology and other solutions for exchange businesses.
The Sebi approval also ends nearly four-year-long legal battle between the regulator and the exchange.
After Sebi rejected MCX-SX's application to conduct trading in other segments, the exchange had moved the Bombay High Court in July 2010. The high court asked Sebi in August, 2010 to consider the MCX-SX application, after which the regulator sought certain details from the exchange.
MCX-SX filed its reply in September 2010, but Sebi passed an order a few days later rejecting the application for equities and other segments.
MCX-SX challenged the Sebi order again in the high court, which directed the regulator in March 2012 to consider the application of MCX-SX afresh.
Sebi, however, moved the Supreme Court, seeking a stay on the high court order. The apex court disposed off Sebi's plea in April after the regulator gave an undertaking that it would amend the rules and consider afresh MCX-SX application, while the exchange also agreed to comply with requisite regulations.
Subsequently on June 20 this year, Sebi notified new norms for ownership and governance of stock exchanges, which among others have paved the way for setting up of new bourses and also permit the exchanges to get listed.

MCX-SX's MD and CEO Joseph Massey said that the exchange would soon announce its plans for launching trading in new asset classes.
"We are truly grateful to Sebi for granting us approval to commence operations in other market segments. We remain committed to the development of Indian capital market, catering to the growing needs of investors..."
Commenting on the development, MCX-SX Chairman Ashok Jha said: "This is indeed a huge development for the Indian capital market industry and will create a conducive environment for growth of all asset classes. We will continue with our efforts of systematic development of markets and the financial market ecosystem."
The stock market activities have seen low penetration in India and less than two per cent of its population of over 1.2 billion takes part in exchange-traded activities.
In most matured markets, penetration is 30-50 percent, while in the US, out of a total population of 300 million, over 50 percent participate in exchange-traded activities.
Also, top five cities here contribute nearly three-fourth of total market turnover, while top 25 brokers account for 45 percent of equity volumes in the country. The equity segment accounts for over 75 percent of overall market activities.
The new Sebi norms are expected to encourage a higher level of participation in this sector, leading to creation of a healthy and competitive environment in all its segments.
Allowing listing of exchanges and a longer divestment period will bring this industry on par with other regulated sectors such as banking, insurance and commodity exchanges, the experts believe.
Under the new norms, no entity, either individually or together with persons acting in concert, would be allowed to acquire or hold more than 5 percent stake directly or indirectly in a stock exchange.
However, stock exchanges, depositories, banks, insurance companies and public financial institutions from India can acquire or hold up to 15 percent stake.
The individual shareholding would be capped at 5 percent for all non-Indian entities without any exemptions, and their collective holding cannot exceed 49 percent. Out of this, the holding through FDI route would be capped at 26 percent and that through FII at 23 percent.
Sebi also said that the existing regulations for Manner of Increasing and Maintaining Public Shareholding (MIMPS) in Recognised Stock Exchanges stand repealed after notification of new norms.


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