Whistle-blowers Allegations about MCX are baseless: PS Reddy, MD & CEO
That is factually incorrect again because we had three Waltz in Ahmedabad there is a base delivery centre and the insurance coverage is distributed almost all about Rs2,000 crore at that point of the time across the three Waltzes.
PS Reddy, Managing Director (MD) and Chief Executive Officer (CEO), Multi Commodity Exchange (MCX), talks about the letter available on social media platform alleging the platform of misdeeds during an exclusive interview with Anil Singhvi, Managing Editor, Zee Business. He termed all the allegations as false and baseless. Edited Excerpts:
I would like to know about the four points that have been raised in a letter that is available on social media. Has MCX had received any letter from a whistle-blower that is raising certain questions from the management of MCX?
Yes, we did receive a letter from SEBI seeking some clarification on the letter, which will be furnished to them. But the issues that have been raised are baseless and you know that we will deal with them suitably.
The letter alleges about certain loopholes in cotton trades to benefit some players. What is your take on it?
That is baseless as the names that have been mentioned have bought the stock on the platform and they delivered the same on the platform. It is completely baseless, and I am telling you that the stocks are being lifted by the buyers and everything is happening as usual.
It also alleges that the contract of size for developing a trading software was made big to help some members of the top management of MCX to make some money. Is there any truth in the allegation? Update us about the actual size of the contract and the quantum by which it was increased?
This contract is actually for the gold spot exchange that we wanted to develop as when the government will permit the gold spot trading, we wanted to have this platform ready and for that reason we have roped and there were additional requirements that have come up over the year’s depending on the business requirement and that will happen in any software development. I don’t think that anybody has any wasted interest in assigning this contract.
There are questions related to gold delivery and it alleges that MCX didn’t have sufficient insurance coverage to take delivery of the gold and overnight it has to increase it and, in the process, it, MCX, didn’t follow the set rules and regulations. What is your take on it?
That is factually incorrect again because we had three Waltz in Ahmedabad there is a base delivery centre and the insurance coverage is distributed almost all about Rs2,000 crore at that point of the time across the three Waltzes. If one wants to deposit at a particular Waltz then all the Rs2,000 crore may not be able to accommodate but across the three, the insurance coverage is adequately available. In any case, we have further increased it to about Rs3,000 crores and that is not an issue at all. And, again we tried to accommodate the customer as much as we could, but the insurance coverage could not be increased in that particular Waltz in overnight that’s why the gold has to be deposited beyond the insurance limit to other waltzes when the delivery takes place.
I would like to know about the truth of the allegation that says that instead of popularizing commodity trading between MCX and the investors the volume comes from selected brokers who give almost 85-90% volume to the exchange and the exchange has a focus on them. It also allege that the exchange is having a special focus on algorithmic trading?
It is also false, and you can even verify that it is factually incorrect statement that 90% what they are claiming. Our algorithmic trading contributes more than 35% and which I have said in my meeting and phone call with the analysts also. We want every participant to come and contribute on the platform and we don’t have any special focus on the algorithmic traders.
There are questions related to the quality of cotton and it is being said that the cotton available in the Godowns of MCX are either bad in quality or are wet. What is your take on it, and will you like to ensure your market participants that there are no issues related to the quality of the cotton or there is a need for verification?
I doubly reassure that the quality in the godowns of MCX are as per the contract and everybody is lifting the delivery. There are no issues and that is what I can reemphasize.
Do you have any idea about those who have written this letter?
We have no such clue yet, but we will go into detail and we need to engage someone to get into the bottom of this.
By when you will provide a clarification of the allegations to SEBI or you have already responded to it?
We will be giving it this week as we have received it just 2 days before from here.
What is your next action plan on this matter, i.e. you will go for any internal enquiry or it is not needed and just respond to SEBI and leave things on it?
We will take legal advice and then proceed accordingly but I have said that it is baseless, and no one needs to be worried about the quality and quantity that is lying in MCX godown. No one needs to worry about the area of the development set-up that takes place in MCX. We are on the right path and track and I have been here for almost 4 months and know it doing wonderfully well.
Update us on how the increased gold prices have had an impact on the business of exchange in terms of volume and value? What impact will it have on your results?
We are not supposed to comment on MCX stocks or provide any kind of outlook but as far as revenue for MCX is turnover based revenue, so when the turnover will do well then, our incomes will go up automatically. Gold is undoubtedly is contributing to our growth and let see when we will be publishing our results by the end of September or October and I am hopeful that we will do well.
Would you use Zee Business as a platform to ensure your investors, shareholders and stakeholders that there are no problems related to MCX?
I reassure them that we are doing well and not worry about these complaints and we will deal with them sternly.