The Securities and Exchange Board of India (SEBI) has officially withdrawn the recognition granted to the Indian Commodity Exchange Ltd (ICEX), effectively marking the exchange's exit from the bourse business. This decision was notified on December 24, following SEBI's earlier approval for ICEX's voluntary surrender of recognition after over two years of non-compliance issues.
SEBI stated, "The Securities and Exchange Board of India (SEBI) hereby notifies...stands withdrawn with effect from the date of publication of this notification..." This formal exit follows extensive regulatory reviews of ICEX's valuation reports, compliance submissions, and various undertakings. The exchange assured SEBI of its commitment, declaring all liabilities and confirming there were no undisclosed third-party claims. They also took full responsibility for any future financial obligations.
Under the new directives, SEBI has ordered the exchange to comply with tax obligations under the Income Tax Act, 1961, mandated it refrain from using "stock exchange" within its name, and required maintenance of a historical database for all transactions previously conducted on its platform.
ICEX, based in Surat, Gujarat, was initially granted permanent recognition under the Forward Contracts (Regulation) Act, 1952, back in 2009. Its subsequent recognition as a stock exchange occurred after the merger of the Forward Markets Commission (FMC) with SEBI in 2015, positioning ICEX under the Securities Contracts (Regulation) Act, 1956.
Problems began for ICEX when, in May 2022, SEBI derecognized the exchange due to significant non-compliance issues, including failure to meet minimum net-worth requirements and infrastructural shortcomings. Following this, ICEX appealed the decision to the Securities Appellate Tribunal (SAT), which provisionally permitted them to retain their recognition if they could secure the necessary funding and comply with SEBI regulations within a year.
ICEX faced persistent challenges in raising funds, primarily due to SEBI's restrictive shareholding cap allowing only 5% equity for investors. The exchange put forward requests for SEBI to ease this cap to 51% for five years or accept their surrender proposal. SEBI, unfortunately, turned down these requests, viewing ICEX's submission as voluntary, thereby paving the way for the current withdrawal process.
Eventually, after considerable deliberation, ICEX shareholders culminated the situation by passing a resolution back in May 2023, approving the surrender of recognition. This led SEBI to initiate the formal exit sequence for ICEX.
According to the directives, along with fulfilling tax obligations, ICEX must maintain accurate records of all transactions before it steps away entirely. The official statement from SEBI emphasized the importance of closure, stating, "The exit of the ICEX as a stock exchange..." effectively sealing its fate.
The outcome of this entire situation raises questions about the future of commodity trading within India and reflects on the regulatory challenges faced by smaller exchanges amid larger market players. The story of ICEX serves as both cautionary and historical, marking the evolution of market regulations and the complex dynamics at play within India's financial markets.
