Date:01/02/2007 URL: http://www.thehindubusinessline.com/2007/02/01/stories/2007020103451200.htm

Back Commodity exchanges told to ensure uniform vendor registration policy

Pratim Ranjan Bose

MCX withdraws payment of guarantee for empanelment

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Kolkata Jan. 31 The Forward Markets Commission (FMC) has asked the Multi Commodity Exchange (MCX) to re-align its trading-software vendor empanelment policies. This is to ensure fair competition among the growing list of manufacturers eyeing the straight-through processing (STP) or computer-to-computer link (CTCL) software market created due to fast growth of on-line commodity as well as stock exchanges. Responding to FMC's order issued earlier this month, MCX has withdrawn clauses like payment of Rs 1 crore bank guarantee by aspiring vendors. MCX was previously insisting on bank guarantee in addition to the industry norm of securing Rs 10 lakh empanelment fee and annual fees ranging between Rs 2 lakh and 5 lakh.

According to sources, the FMC order came in the wake of a complaint from Omnesys Technologies, a Mumbai-based software manufacturer. The latter had accused MCX of creating barriers for empanelment of new vendors.

STP or CTCL (as is commonly known) platforms enable trading activities at the broker end in on-line exchanges. As on date, MCX has only two empanelled vendors — Financial Technologies India Ltd and NSEIT — for supplying such software to its members.

While NSEIT is an IT outfit of NSE, FTIL is promoter of MCX and is the largest as well as one of the oldest players in the CTCL market. According to industry sources, FTIL controls roughly 80 per cent of the market in both equity as well as commodity markets.

FTIL's ODIN software is arguably the most popular software in the commodity futures market, including the members of both NCDEX and MCX. Since all other online exchanges register a larger number of vendors, MCX's policies allegedly created a situation whereby a larger number of software companies which are empanelled with BSE, NSE and NCDEX completely miss out the opportunity to market their produce to members of MCX.

When contacted Mr Sanjay Lunia, Director, FMC told Business Line: "We have asked all commodity exchanges, to ensure an uniform vendor registration policy as per the existing practices followed by leading exchanges in India and abroad."

Mr Joseph Massey, Deputy Managing Director of MCX, admitted withdrawal of bank guarantee clause. He, however, denied allegations charging unfair trade practices.

"Such software plays an important role in ensuring efficient as well as fair trading practices on exchange platform. As part of our effort to build a healthy marketplace, MCX encouraged empanelment of vendors with proven track record. This was for the long term interest of the market participants," he said denying any undue favour to its parent FTIL.