The market regulator has permitted the exit of the Indian Commodity Exchange (ICEX) a little more than a year after the exchange's shareholders approved a voluntary surrender of its recognition.
In an exit order passed on December 10, the Securities and Exchange Board of India (SEBI) stated that ICEX should change its name and not use 'exchange' or any variant in its name or in the name of its subsidiary if it plans to continue as a corporate entity under the Companies Act 2013.
Background
ICEX which was granted recognition as a commodity derivatives exchange in 2009. In 2022, the markets regulator had withdrawn the recognition granted to the exchange "due to non-compliance with the minimum net-worth requirement, circular issued by SEBI, observations of SEBI pursuant to inspection and infrastructural requirements ."
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ICEX filed an appeal at the Securities Appellate Tribunal (SAT) against the SEBI order and the tribunal, in its June 2022 order, had set aside the market regulator's order subject to certain conditions.
The tribunal said that the operations at the exchange would remain suspended until ICEX raises the requisite funds and completes all compliances to the satisfaction of SEBI in a year. If ICEX could raise the funds and meet the compliance requirements, then it could apply to SEBI for permission to resume its operations and the regulator would consider the application and give an appropriate order. If ICEX could not meet these requirements, then SEBI could pass an order withdrawing the recognition given to the exchange, after giving the exchange an opportunity of hearing.
In February 2023, the exchange asked SEBI to allow a relaxation in norms on the ownership structure. The ICEX's management had tried to raise funds, but the applicable shareholding norms for recognised stock exchanges as per Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (or SECC Regulations) restricts maximum shareholding up to 5 percent. This clause, according to ICEX, made the proposition "unattractive for the new investors".
ICEX therefore requested whether the new investors could be allowed to invest up to 51 percent in the exchange for five years. The exchange also added that if the regulator declines this request, the regulator could consider the same letter as a voluntary surrender of the recognition granted to the exchange.
Since there is no regulatory provision to allow investors other than certain eligible entities to hold more than 5 percent stake in any recognised stock exchange, SEBI accepted the aforementioned letter of ICEX as voluntary surrender of the recognition.
Accordingly, ICEX vide email dated May 25, 2023 submitted a resolution passed by the shareholders of the Exchange, approving the voluntary surrender of recognition granted to ICEX.
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