FTIL proposes 40% cut in annual maintenance contract fee to MCX

MUMBAI: Financial Technologies (India) (FTIL), promoter of Multi Commodity Exchange of India ( MCX), has proposed a 40% cut in its annual maintenance contract (AMC) fees with the bourse as part of the renegotiation of the controversial technology contracts, two persons familiar with the development told ET. FTIL has also proposed introduction of an exit clause to the tech deals, which a forensic audit found one-sided, sources said.

If MCX agrees to this proposal, its annual outgo on technology costs would decline to Rs 36 crore from Rs 60 crore at present, they added.

“The monthly fee under the AMC is proposed to be cut to Rs 3 crore from Rs 5 crore, and tweaking parts of technology agreement, like introduction of an exit clause, has also been discussed,” one of them said.The renegotiation of AMC is the result of auditor PwC’s forensic audit of MCX since its inception in late 2003 to September 2013 conducted at the instance of commodity market regulator Forward Markets Commission (FMC) after the Rs 5,600 crore scam at NSEL, an FTIL subsidiary, that broke out in July last year. The PwC audit report was submitted in April. The audit focused on transactions, including technology agreements, entered into between FTIL and MCX. PwC termed these contracts “one-sided” and “restrictive” with noncompete clauses included in agreements with long tenure. For these transactions over the 10-year review period, MCX paid FTIL Rs 660 crore, said PwC. Asked if such a deal was likely between the two, MCX declined to comment.

An FTIL spokesperson said, “FTIL would not like to comment on the same and has no relevance as one-sided technology contract as stated by PwC as per your mail (sic).” FTIL, a broker and exchange solutions provider, currently holds 20% in MCX, the country’s largest commodity exchange with over 80% market share. The exchange offers futures trading in gold, silver, crude oil and natural gas, among other non-farm products.


The promoter recently agreed to sell 15% of its stake in MCX to Kotak group for Rs 459 crore, valuing the bourse at Rs 3,060 crore. The deal is yet to be completed. MCX’s nearest rival, agri bourse NCDEX, held by the likes of NSE and LIC, was valued at a distant Rs 887 crore when Shree Renuka Sugars divested 7.5% in the bourse, including 5% to MCX, in May this year. Renuka holds 5% in NCDEX now.

FTIL has decided to exit its exchange ventures, including MCX, after FMC in December found it unfit to own shares in or run an exchange, post the NSEL scam.