Home / Market / Stock-market-news /  FT group’s stake in Dubai-based DGCX falls to 31%

Mumbai: The combined holding of
Financial Technologies (India) Ltd
(FTIL) and its unit Multi-Commodity Exchange of India (MCX) in the Dubai Gold and Commodities Exchange (DGCX) has dropped to around 31% from 44%, after they chose not to subscribe to a rights issue by the West Asian bourse.

A spokesperson for the FTIL group, originally a co-promoter of the bourse, said the Emirates Securities and Commodities Authority’s 10-day deadline from the date to subscribe to the issue was too short for it to obtain approvals from the Reserve Bank of India (RBI) and other regulators.

DGCX in an email declined to divulge information such as the rights ratio and the amount raised through the issue, but said the rights of FTIL group companies in the bourse haven’t changed.

The FTIL group and Dubai Multi Commodities Centre (DMCC)—owned by the Dubai government—were promoters of the bourse, and held an equal share in the joint venture when it started operations in 2005. FTIL and MCX held 40% and 10%, respectively, in DGCX when it began operations.

In fiscal 2007, FTIL sold a 1% stake, while MCX offloaded a 5% stake in two tranches between 2007 and 2009, following which they held 39% and 5%, respectively, in DGCX.

The FTIL group currently holds two of five board seats at the exchange, and the group’s promoter, Jignesh Shah, is the vice-chairman of DGCX, while Joseph Massey is a director.

Shah is the chairman and group chief executive officer (CEO) of FTIL and non-executive vice-chairman of MCX, while Massey is managing director and CEO of MCX Stock Exchange—promoted by MCX and FTIL.

“FTIL group continues to hold two non-executive board seats which, by definition, have no executive control. No board director has any operational responsibility for the running of the company," DGCX said.

“FTIL Group is a minority shareholder of DGCX," the Dubai bourse said in a release dated 5 September, adding: “DGCX can confirm that no director of the exchange has any operational responsibility for the running of the company... DMCC, a government of Dubai entity, is the lead promoter of the exchange and subsequent to a recent share issue now owns 67% of DGCX."

The FTIL group is also a promoter of the Bahrain Financial Exchange, Bourse Africa, the Mauritius-based Global Board of Trade, and the Singapore Mercantile Exchange.

In March, DGCX replaced all FTIL group-supplied trading and clearing technologies with a new system supplied by another software maker. The exchange said the decision was driven by the technology provided by the new supplier.

“Traders who wanted to trade HFT (high-frequency trading) or algorithmic programmes on the exchange couldn’t do so historically because of the latency issues within our matching engine. Now we’re as fast as any exchange globally," Gary Anderson, CEO of DGCX, was cited as saying by Futures and Options World magazine’s website in June.

While the FTIL group said its decision to not subscribe to the rights issue had to do with a short time frame for seeking regulatory approval, experts disagreed.

“The fact that their software was removed from their exchange, and FT primarily being a software company, was a major setback to the company," said Arun Kejriwal, director of research firm Kejriwal Research and Investment Services. “Probably, by not increasing their stake and becoming a smaller partner than they originally were, it is a way of indicating that they would like to quit given an opportunity."

Also, in April, RBI said Indians were using the overseas direct investment automatic route to set up certain structures facilitating trading in currencies, securities and commodities.

“It has come to the notice of the Reserve Bank that such structures having equity participation of Indian parties have also started offering financial products linked to Indian rupee (e.g. non-deliverable trades involving foreign currency, rupee exchange rates, stock indices linked to Indian market, etc.)," RBI had said in a release.

“It is clarified that any overseas entity having equity participation directly/indirectly shall not offer such products without the specific approval of the Reserve Bank of India given that currently Indian rupee is not fully convertible and such products could have implications for the exchange rate management of the country," RBI added.

An FTIL spokesperson said DGCX was a joint venture that offered a trading platform for rupee-dollar future contracts and the group had been intimated about RBI’s circular “... even though FTIL is a minority shareholder in DGCX and have no control in the management and business decision of DGCX". The company is in full compliance with India’s Foreign Exchange Management Act regulations, the spokesperson said in an email.

FTIL has been in focus with its beleaguered unit National Spot Exchange Ltd (NSEL) battling a 5,600 crore settlement crisis. On 31 July, NSEL abruptly suspended trading of all contracts without offering a clear reason for doing so. The spot exchange has since not met with a single payout obligation.

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