In a significant regulatory development, the Securities and Exchange Board of India (SEBI) formally notified the withdrawal of recognition granted to the Indian Commodity Exchange Ltd (ICEX), marking its official exit from the bourse business. This decision, announced on Friday, December 27, follows over two years of regulatory scrutiny and compliance processes.
SEBI Exit Order: Key Details
The decision to derecognize ICEX was initiated in May 2022 due to the commodity exchange’s non-compliance with critical regulatory requirements, including:
- Minimum Net Worth Compliance: ICEX failed to meet the mandated financial threshold.
- Infrastructural Deficiencies: The exchange’s operational framework fell short of regulatory standards.
- Inspection Findings: SEBI identified multiple irregularities during its review process.
To ensure a smooth exit, SEBI mandated ICEX to:
- Comply with Tax Obligations: Adhere to provisions under the Income Tax Act, 1961.
- Change Its Name: Cease using the term “stock exchange” in its branding.
- Maintain Transaction Records: Preserve a database of past transactions for regulatory purposes.
- Declare Known Liabilities: Assure SEBI of the absence of undisclosed third-party liabilities.
- Assume Responsibility: Accept accountability for any future financial claims.
The Journey of ICEX
- Founded in 2009: ICEX was granted permanent recognition under the Forward Contracts (Regulation) Act, 1952 (FCRA).
- 2015 Transition: With the merger of the Forward Markets Commission (FMC) into SEBI, ICEX became a recognized stock exchange under the Securities Contracts (Regulation) Act, 1956 (SCRA).
- Challenges in Fundraising: Despite efforts to secure funds, ICEX struggled due to SEBI’s investor shareholding cap of 5%.
- Appeal and Temporary Relief: The Securities Appellate Tribunal (SAT) allowed ICEX to retain recognition temporarily in 2022, provided it raised sufficient funds and complied with SEBI norms.
- Voluntary Surrender: In May 2023, ICEX shareholders passed a resolution approving the surrender of its recognition after SEBI denied relaxation of shareholding norms.
The Final Verdict: SEBI Stand
SEBI treated ICEX request for shareholding relaxation as a voluntary surrender of recognition. After evaluating compliance submissions, valuation reports, and undertakings, the regulator formally approved the exchange’s exit.
“The SEBI hereby notifies that the recognition granted to the Indian Commodity Exchange Ltd stands withdrawn with effect from the date of publication of this notification in the official gazette,” stated SEBI’s circular.
ICEX Legacy in Commodity Exchange
Based in Surat, Gujarat, ICEX played a niche role in India’s commodity trading landscape. Despite its exit, the exchange’s story underscores the importance of stringent compliance and adaptability in the evolving regulatory environment of Indian capital markets.
