Indian regulator SEBI shuts down Indian Commodity Exchange on non-compliance

Capital markets regulator Sebi has derecognised Indian Commodity Exchange Ltd saying the bourse does not have sufficient number of experienced staff and requisite financial capacity. Consequently, “ICEX shall cease to be a recognised stock exchange,” Sebi said in an order.

ICEX (Indian Commodity Exchange) was recognised as an exchange under forward contracts through a notification issued in October 2009 by the central government on a permanent basis.

The regulator has withdrawn its recognition after finding the bourse non-compliant on several grounds like net worth requirement, Sebi inspection observations and infrastructure.

In its order, Sebi noted that net worth of ICEX was Rs 93.43 crore as on November 2021, which further reduced to Rs 86.45 crore as on January, 2022. According to the rules, every recognised stock exchange is required to have a minimum net worth of Rs 100 crore at all times.

The regulator noted that none of the contracts being run on the exchange were showing any significant volume. “The compliance and regulatory issues as well as lack of staff for most important functions such as surveillance made the situation at the exchange very precarious, making its continued survival questionable and a risk for securities market as a whole,” Sebi said.

Regarding the requisite capability, including its financial capacity, functional expertise and infrastructure, ICEX, in its submission to Sebi, said it does not have full capability at present and unless exchange raises funds it would be difficult to build such capability at the optimum level.

The MD and CEO has now resigned from the exchange. Further, the exchange has mentioned that experienced personnel are not willing to join the company.

If ICEX is allowed to function in the present manner without any immediate remedial action, it would not only lose its relevance as a public institution but also erode the confidence of the investors, which would in turn compromise on the orderly development of the securities market, it added. Accordingly, the recognition granted to ICEX stands withdrawn, Sebi said. Pursuant to withdrawal of recognition to ICEX, the exchange has been directed to refrain from using the expression ‘stock exchange’ or any variant in its name or in its subsidiary company’s name

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