Oct. 23 (Bloomberg) -- The Multi Commodity Exchange of India Ltd. formed a panel to run the nation’s biggest platform for commodities as authorities widened a probe into trading practices at a related spot bourse.
Pravir Vohra and G. Ananth Raman have been appointed as independent directors to the board, Multi Commodity, also known as MCX, said in an exchange filing today. Parveen Kumar Singhal, a deputy managing director, will act as the chief executive until a managing director is named, it said.
MCX’s Chief Executive Officer Shreekant Javalgekar, its chairman, and three directors quit over the past month after the commodities regulator tightened rules for selecting directors on futures exchanges. Investors have been calling for the resignation of MCX founder and Vice Chairman Jignesh Shah as authorities widened an investigation into the failure of a spot-trading platform backed by him.
“Jignesh Shah is just buying time,” Kishor Ostwal, managing director at CNI Research Ltd., said in an interview. “There is a strong possibility that MCX may change hands and the current promoters may lose control.”
Shares of MCX, which controls about 90 percent of the nation’s $2.8 trillion commodities futures market, have dropped 26 percent since July 31 when the National Spot Exchange Ltd. suspended trading in most commodities. Financial Technologies (India) Ltd., which owns 26 percent of MCX, has plunged 70 percent in the period. The NSEL broke rules by permitting the sale of goods traders didn’t keep in its warehouses, according to the regulator.
Shah’s business began floundering as the payment crisis and trading irregularities at the now defunct NSEL came to light. Shah this month quit the board of the MCX-Stock Exchange Ltd., India’s newest equity bourse backed by him, after the Mumbai police began investigating the NSEL.
“The entire episode has been good for the commodity market as it will mean stronger regulation and better structure in the longer term,” said Kishore Narne, head of commodity and currency at Motilal Oswal Commodity Broker Ltd. “It may take some time to happen and there may be some pain for the market over the next six months.”
The Economic Offences Wing of the Mumbai police has arrested NSEL’s former Chief Executive Officer Anjani Sinha and two other senior officials after an investors’ group complained the executives diverted funds and failed to settle about 56 billion rupees ($907 million) in dues to investors.
The bourse has failed to meet most of the payments target set under the supervision of the regulator.
The police yesterday arrested Nilesh Patel, the managing director of NK Proteins Ltd., the top defaulter on the NSEL, according to Rajvardhan, additional commissioner of police at the economic offences wing. Three calls made to the Ahmedabad-based NK Proteins today weren’t answered.
NSEL and Financial Technologies Group will co-operate with the authorities in the probe, the exchange said in a statement on Sept. 30. The regulator has sought responses from Financial Technologies, Jignesh Shah, Javalgekar and Joseph Massey, who quit as the managing director of the MCX-SX on Oct. 9, on their eligibility to operate MCX, the Press Trust of India reported Oct. 16. Financial Technologies and the executives have sought a one-month extension to a deadline of Oct. 18 to reply to the notice, the agency reported.
Venkat Chary, MCX’s chairman, and five other directors resigned from the board on Aug. 30 to comply with regulator’s guidelines for board members. The regulator has since nominated four independent directors to the MCX board.
The selection of a new chief executive for MCX will need to be approved by the regulator, Ramesh Abhishek, chairman of the Forward Markets Commission, said in a text message yesterday.
MCX closed little changed at 474.35 rupees in Mumbai today. Financial Technologies advanced 2.3 percent to 164 rupees.