MCX Audit by PWC Shows Lots of Related Party Issues, Sham Trades

4 comments Written on May 29th, 2014 by
Categories: FinanTech

The Price Waterhouse Cooper report on MCX insider transactions is pretty damning. It’s at the end of this post, but here’s a quick summary:

  • FTIL, which owns 26% of FT, controlled a lot of the vendor contracts given out by MCX
  • FTIL has a stranglehold on MCX operations, getting paid 649 crores over the years for services from MCX. NBHC, a warehousing company owned by FT, got 42 crores for its services.
  • And there was no open-tendering for price discovery. So FT charged anything, there was no cross-checks.
  • Related parties to FTIL companies have traded on the MCX (not allowed)
  • MCX had even paid some such parties money, either as vendors or as donations
  • MCX paid 55 cr. to parties that either didn’t have a physical presence, or where the transaction was shady.
  • Lot of manipulation has been detected in trades by clients which have been changed or reassigned after the time allowed for such changes.
    • Many big brokers like Riddhi Siddhi  and Edelweiss conducted “wash” (sham) trades on MCX
    • FTIL would get upto 12% of gross fees, plus Rs. 1 crore a month for the technology and services they provided to MCX
    • Even a foreign stock exchange which wanted to buy a sake in MCX had said that the agreements with FTIL were one-sided.

The point now is that MCX has been delinked from FTIL forcibly after FTIL was declared “not fit and proper” to run an exchange after the NSEL crisis.

However, if MCX operations depend on FTIL technology so much, there is much dependency at stake here. And if agreements are one-sided, and don’t allow MCX to back out (which is one case pointed out) then a buyer of MCX will have to live with “one-sided” deals for a long time, and that could impact their ability to make the exchange more profitable.

The full report:

Related Posts Plugin for WordPress, Blogger...
About the Author:
http://www.capitalmind.in
The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@capitalmind.in.

4 comments “MCX Audit by PWC Shows Lots of Related Party Issues, Sham Trades”

Riddhi Siddhi implicated in this report.
RBI permits white ATM’s to Riddhi Siddhi.
Are the two companies same?

I am holding MCX from 800 levels…I am clueless… holding on to it because very shy to book loss…other my holdings had a dream run & providing me 65-124% returns…Pl advice on MCX

The ugliest truth about MCX is yet to come out , insider trading web and money laundering

The 3rd point ‘And there was no’ is incomplete