Markets regulator Sebi on Monday imposed a penalty of Rs 25 lakh on Multi Commodity Exchange of India (MCX) for inadequate disclosures regarding payment to 63 Moons Technologies for software services. The fine needs to be made within 45 days, the Securities and Exchange Board of India (Sebi) said in its order.
The case pertains to disclosure lapses regarding the payment made to 63 Moons Technologies (formerly known as Financial Technologies India Ltd) for the trading software contract.
MCX entered into a trading software contract with 63 Moons Technologies in 2003. At that time, 63 Moons fully owned MCX.
In 2020, MCX decided to shift to a new trading platform (CDP) and gave the development contract to TCS. However, several delays occurred in the CDP rollout, leading MCX to decide to extend services with 63 Moons at a significantly higher cost.
MCX disclosed in press releases between September and December 2022 that it had extended Support and Managed services for its existing trading and clearing platform with 63 Moons, but did not disclose the high payments being made — Rs 60 crore for October-December 2022 and Rs 81 crore per quarter till half-year ended June 2023. This totalled Rs 222 crore over three quarters (October 2022-June 2023), Sebi said in its order.
This amount was almost twice the company’s profit in FY 2021-22 (Rs 118 crore), yet was disclosed only in January 2023, it added.
“I note that the quarterly payments made by MCX to 63 Moons for 3 quarters between October 2022-June 2023, which totalled Rs 222 crore, was much larger than the annual profit of MCX for the previous FY 2021-22, which stood at Rs 118 crore. This information was material information since the said quarterly payments exceeded the quarterly payments made earlier to 63 Moons by many times. The increased quarterly payments can be said to have a huge bearing on the profitability of MCX,” Sebi Whole Time Member Ashwani Bhatia said.
Accordingly, such information has to be treated as material information, which ought to have been disclosed by MCX to the public, in terms of the provisions of the LODR (Listing Obligations and Disclosure Requirements) Regulations, 2015.
By not disclosing, MCX has violated the provisions of LODR norms and accordingly imposed the penalty of Rs 25 lakh on it, as per the order.
