CBI opens investigations into suspected misuse of MSEI funds

Yet another stock exchange in Mumbai, the MSEI (Metropolitan Stock Exchange of India), finds itself in choppy waters.

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Apart from the reality of no revival of its business for several years, a scheme of the exchange to promote its currency derivatives has come under the scanner of the Central Bureau of Investigations (CBI).

According to documents available with The Sunday Guardian, together with information from highly placed sources, the CBI has initiated a preliminary inquiry in the matter of "unauthorised utilisation of MSEI funds for market making scheme in the currency derivatives segment and non-adherence of standard operating procedures (SOP) while making payments to vendors/stock brokers." Those close to the exchange deny that any impropriety took place, a version challenged by those investigating the issue. Market watchers are clear that a full probe is needed to get the true picture.

In 2022, the MSEI was eager to avoid closure due to fast depleting net worth, and hence sought a merger with its cash-rich clearing and settlement arm MCCIL. It was unprecedented in India's exchange space to witness an exchange and its clearing arm merging with each other.

MSEI, earlier known as MCX Stock Exchange (MCXSX), is the same exchange that once gave the National Stock Exchange (NSE) a run for its money in the currency derivatives segment in 2008. It had emerged as a leader in the space briefly when a Mumbai businessman was its promoter. After regulatory authorities ensured the ouster of Jignesh Shah, the concerned businessman, from India's exchange space, MCX-SX was later rechristened as MSEI. The renamed entity, however, fell behind in the race with NSE. Successive management teams at the exchange and its board could not succeed in taking on the might of NSE. They could not chalk out a business plan to compete effectively with an exchange that had strong support from influential leaders during the UPA period.