New MCX chief faces a slew of challenges

Manoj Vaish, who was appointed managing director and chief executive officer (MD & CEO) of Multi Commodity Exchange on Thursday, may not find the going entirely smooth at the country’s largest commodity bourse.

A Delhi University alumnus with an MBA in finance and a doctorate, Vaish started his career as a banker in 1984, became an academician a few years later and joined the capital market in 1998.

He was appointed at MCX after the regulator Forward Markets Commission declared Shreekant Javalgekar not fit to run an exchange. Javalgekar resigned from the post in October 2013.

Javalgekar was found guilty of allowing Indian Bullion Markets Association, a subsidiary of the defunct National Spot Exchange Ltd (NSEL) which currently faces a Rs 5,600-crore (Rs 56-billion) payment crisis, to trade on the MCX.

But, the going will not be easy for Vaish due to the ongoing tussle between MCX promoter Financial Technologies India Limited (FTIL) and FMC.

The biggest challenge for Vaish will be to convince the promoter to adhere to regulatory guidelines and reduce FTIL’s stake in the MCX from the existing 26 per cent to two per cent of the paid-up equity capital.

Given that the MCX board has already passed a resolution to seek divestment of FTIL’s stake within a month (by January 25, 2014), the job of the managing director will be to get the board’s decision adhered to. Since the FMC order declaring FTIL not ‘fit and proper’ to run an exchange has been challenged in the Bombay High Court, the new head of the organisation’s day-to-day operations may find it difficult to normalise relations between FMC, the MCX board and FTIL.

The second big challenge for him will be restoring traders’ confidence in the MCX. Since the Rs 5,600-crore (Rs 56-billion) payment crisis at one of the group companies, NSEL, came into the limelight in July, MCX’s average turnover has declined by over a third.

While the levy of commodity transaction tax and other global issues were also responsible for the fall in turnover, the new board members met traders to explore ways to restore confidence and increase MCX’s business, going forward.

The third major issue for him will be operational challenges. Until now, the exchange has been monitored by the anchor investor, a concept even the FMC felt was necessary to keep investors’ and traders’ interests intact.

After the exit of FTIL, MCX will be completely demutualised unless the new MD & CEO looks for a new anchor investor from a long-term perspective, as assigned by its board to the new committee.

Since the management, for the first time, will be run by professionals with some independent directors without equity interest, it would be interesting to see how the new MD and CEO keeps the exchange’s market share intact at around 80 per cent, considering the rapid progress made by competing entities.

Image: Manoj Vaish; Photograph, courtesy: Business Standard