SEBI revokes ICEX recognition, approves voluntary exit from exchange business

Capital markets regulator Securities and Exchange Board of India (SEBI) on Friday, December 27, notified that the recognition granted to the Indian Commodity Exchange Ltd (ICEX) has been withdrawn, formally signifying its exit from the bourse business. This came after the regulator allowed ICEX to exit the exchange space after its recognition was withdrawn over two years ago.

The move followed after the commodity exchange fulfilled the regulatory requirements. "The SEBI hereby notifies that the recognition granted to the Indian Commodity Exchange Ltd stands withdrawn with effect from the date of publication of this notification in the official gazette," said SEBI in its circular.

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SEBI allows ICEX to exit exchange business

In its exit order, the regulator reviewed ICEX's valuation report, compliance submissions, and undertakings. Additionally, the regulator directed ICEX to comply with its tax obligations under the Income Tax Act, 1961, change its name and not use the expression "stock exchange," and maintain a database of all transactions on its platform for the previous years.

The bourses declared all known liabilities and assured SEBI it had no undisclosed third-party liabilities. According to SEBI, the commodity exchange also undertook complete responsibility for any future financial claims that may arise. 

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Hence, SEBI permitted "the exit of the ICEX as a stock exchange and thus the consequent withdrawal of recognition granted to ICEX". ICEX, a commodity exchange based in Surat, Gujarat, was granted permanent recognition in 2009 under the Forward Contracts (Regulation) Act of 1952 (FCRA).

With the merger of the Forward Markets Commission (FMC) into SEBI in 2015, ICEX became a recognised stock exchange under the Securities Contracts (Regulation) Act, 1956 (SCRA). In May 2022, SEBI derecognised ICEX due to non-compliance with the minimum net worth requirement, infrastructural deficiencies, and inspection findings.

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ICEX appealed to the Securities Appellate Tribunal (SAT), which allowed ICEX to retain its recognition temporarily, provided it raised funds and complied with SEBI regulations within a year. ICEX explored options to raise funds but found it difficult due to SEBI's shareholding cap of five per cent for investors in stock exchanges.

It requested that the regulator permit investors to hold up to 51 per cent equity for five years. If denied, ICEX offered to surrender its recognition voluntarily. SEBI declined ICEX's request to relax shareholding norms, treating ICEX's letter as a voluntary surrender. ICEX shareholders passed a resolution in May 2023, approving the surrender of recognition, following which SEBI initiated the exit process.