Financial Technologies Falls as Regulator Rejects Plan to Set up Exchange
Financial Technologies (India) Ltd. is set for its biggest decline in almost two years after the nation’s stock market regulator rejected an application by a unit to set up a bourse for trading securities.
The shares declined 10.1 percent, heading for their biggest one-day drop since October 2008, to 1,234.95 rupees as of 12:44 p.m. local time in Mumbai. The stock was the worst performer on the Bombay Stock Exchange 200 Index today.
The MCX Stock Exchange Ltd.’s two controlling holders have an excessively large stake in the bourse, the Securities & Exchange Board of India said in an order yesterday. The bourse, which has traded currencies since October 2008, sought permission in April to deal in securities including derivatives and equities to compete with the nation’s two main exchanges.
“The concentration of economic interest in a recognized stock exchange in the hands of two promoters is not in the interest of a well-regulated securities market,” K.M. Abraham, a member at the regulator, said in the order. The Multi Commodity Exchange of India Ltd. and Financial Technologies each hold 5 percent of the bourse.
The exchange’s two founders are “persons acting in concert” and should therefore be limited to jointly holding a maximum of 5 percent of the bourse, according to the regulator’s order yesterday. India caps ownership at 5 percent for a single investor in a bourse, though some financial institutions can hold up to 15 percent.
“We are studying the lengthy order in all its aspects and will take appropriate measure in consultation with our legal counsel,” MCX Stock Exchange said in an e-mailed statement today. “We have confidence and respect in the resilience of our judiciary and the appellate forums and are sure that justice will be done to us in the near future. Until such time, we would continue to work on our currency derivative segment.”
MCX’s controlling stakeholders have also entered into contracts with buy-back arrangements that are in the nature of forward contracts, and these are illegal, the ruling said.
“The conduct of the applicant and its aforesaid promoters lacks honesty and therefore they are not fit and proper for the grant of the application,” Abraham said in the ruling.
To contact the editor responsible for this story: Andreea Papuc at Apapuc1@bloomberg.net