India-based traders' group Bombay Bullion Association intends to purchase a 5% stake in the Multi Commodity Exchange of India Ltd or MCX after a regulator said its founder was not fit to run the largest commodity bourse in the nation, Bloomberg reported. Association President Mohit Kamboj said the group plans to buy the stake from Financial Technologies (India) Ltd through a consortium headed by another Mumbai-based bourse Universal Commodity Exchange Ltd. He added that the 5% stake could be worth around INR 1.25 billion or $20 million. The Bombay Bullion Association represents around 1,000 jewelers and traders.
The report said Bombay Bullion has expressed its interest in MCX through a letter written to the regulator, Forward Markets Commission. Last month, the regulator said Financial Technologies Chairman Jignesh Shah was not eligible to hold any position in the bourse. On December 26, the MCX board advised Financial Technologies that the founder reduce its holding to 2% within a month in order to comply with the order of the regulator.
In October, a review of Shah and his firm's ability to run MCX was ordered by the regulator after defaulting on a payment at the National Spot Exchange Ltd which compelled the government to suspend trading, the report said. The National Spot Exchange Ltd is a spot bourse for commodities also founded by Shah.
The trouble at NSEL started when the government asked for details on the settlement cycle on the exchange on July 14 and further continued when most contracts were suspended on July 31. The exchange was not able to make most of the payment targets which were set under the management of the FMC. Although the MCX did not hold a stake in NSEL, it was under the control of Financial Technologies, which also has exchanges in Bahrain, Botswana and Dubai, the report said.
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