After struggling for almost four years and fighting court battles that went till theSupreme Court, late on Tuesday MCX Stock Exchange (MCX-SX) got the nod from market regulator Sebi to start operations as a full-fledged stock exchange, offering trading in stocks, futures & options on stocks and indices, interest rate derivatives and other products. At present MCX-SX, promoted by leading commodity bourse Multi Commodity Exchange (MCX) and Financial Technologies (FTIL), is allowed to offer trading only in foreign currency derivatives, the permission for which was given in September 2008. The Sebi go-ahead means MCX-SX can become a stock exchange like BSE and NSE. 

Sebi's permission is on condition that the promoters of MCX-SX bring down their shareholding in the exchange to 5% limit within 18 months, they will also have to reduce their entitlement to equity or rights over equity from instruments like warrants within the 5% shareholding limit within 3 years, and the combined voting rights of the two promoters shall never exceed 5% of MCX-SX's equity capital. Commenting on Sebi nod, Ashok Jha, chairman, MCX-SX, said this would 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," Jha was quoted in a release from MCX-SX. 

The Sebi permission is also expected to usher in heightened competition in the exchange space with three bourses competing for investors' money. In turn this may also lead to more tradable products for the Indian market, better trading technology and execution, and lower risks at an even lower cost, market veterans predicted. "The fact that a new entrepreneur-driven exchange has been permitted to set shop will spur competition and bring about a greater transparency in the exchange space. One must remember that systems and trading platforms are the forte of the promoter group (Financial Technology) of MCX-SX," said Arun Kejriwal, a market veteran who runs an independent investment advisory service. "It would be good news for market players as there is a general feeling that the dominant exchange is fairly rigid and would now have to become more flexible," Kejriwal said. 

The Sebi nod also ended a long wait for MCX-SX's dreams of becoming a full-fledged stock exchange that was interspersed with bitter court battles, lobbying at the highest level of the government and shadow boxing, mainly during the tenure of previous Sebi chairman CB Bhave. During that time, MCX-SX's drive to get a full-fledged bourse license had even involved officials from the finance ministry, academicians and top industrialists. The near-acrimonious relationship between MCX-SX and Sebi, however, thawed to become a normal regulator-regulated entity relation after U K Sinha took over as the Sebi chief, who preferred competition in the stock exchange space, and was willing to look at the issue with an open mind, lawyers and finance ministry lobbysts involved in the case throughout these last four years said. 

During these four years, as MCX-SX perceived NSE, the largest stock exchange in India, as its main hurdle, it took on the bourse's practice of allowing free trading only on its currency derivatives segment by reporting this to the Competition Commission of India (CCI) as a predatory practice by the segment leader. After a detailed investigation, the CCI fined NSE and also directed it to move to a fee-based structure in this segment. (TNN)