Cfma 014 Dt. 19.11.22 To MCX Board

November 19, 2022
Ref. No. :- CFMA/14/22-23
To,
The Board of Directors
MCX Limited.
Sub: MCX cannot operate without technical support post December 2022
sans permission from SEBI.
Respected Sir/Madam,
We, Chennai Financial Markets and Accountability is a registered society bearing No.
3482019 and is registered under the Tamil Nadu Societies Registration Act, 1975. We
state that the sole objective of the society is largely to address the public concerns in
the areas of banking, insurance, financial or any other domain of public and
community interest and provide solution to the aggrieved parties. This representation
is being filed in the larger interest of public dealing with MCX and in terms of Article
350 of the Constitution of India.
We are writing this communication in the larger interest of the securities market, the
members and end clients who trade on your Exchange.
As per market sources while on one hand your exchange is clueless on its transition
plan to a new technology platform, on the other hand its MD & CEO Mr. P.S. Reddy
have been time and again making false assurance to members and investors. This is
nothing short of irresponsible conduct on the part of Mr. Reddy.
Earlier, it was informed to the stakeholders that MCX was to go live with the new
technology by July 2022. In August 2022, Mr. Reddy kept assuring that by end of the
month TCS will give full delivery and thereafter MCX will do the necessary tests to
launch the new platform by end of November 2022. In September 2022, MCX officials
were quoted by the media that the new technology platform from TCS will take at least
CHENNAI FINANCIAL MARKETS AND ACCOUNTABILITY

(Registration No. 3482019 under Tamilnadu Societies Registration Act, 1975)
GA, Florentina 43, 1st Main Road, Gandhinagar, Adyar, Chennai - 600020, Tamil Nadu, India.
Telephone: 044 79652180 | Email: contact@cfma.in | Website: www.cfma.in
another 3 – 4 months. This shows complete lack of clarity on the part of MCX
management as regards the project timelines.
While the technical support with the present vendor will get over in Dec 2022, MCX is
not clear whether it will be able to have new system and support in place by them
after thorough tests.
If sources are to be believed, Mr. Reddy once again is attempting to misguide its
stakeholders that it has perpetual license and the exchange can run even without
technical support from any vendor. This once again shows that Mr. Reddy is not
confident that transitioning will happen before Dec 2022. This means that, if the
technology is not transitioned, it will run without any technical support from any of its
vendors.
MCX, being the top Commodity Exchange of India with 90% market share, cannot be
permitted to run without able technical support from any vendor be it the existing
vendor, the new vendor or any third party. The technical support ought to be existing.
It is the question of market integrity after all.
If MCX plans to proceed without any technical support, it ought to have a clear nod
from the market regulator i.e. SEBI to operate in dark. Earlier in August 2022, SEBI had
expressed their displeasure on the way the core technology transition at MCX was
handled by Mr. Reddy.
Earlier also, in the Annual General Meeting, Mr. Reddy made false statements before
its members as regards PSEB (software vendor). Later, ANB which carried audit have
unearthed several irregularities in the same transaction. Lately, even the SEBI has
issued show cause notice to MCX for the contract with PSEB. This only goes to show
the lax approach of Mr. Reddy towards its stakeholders.
Just like how DGCA will not permit any airlines to operate with technical and ground
support despite the fact that Boeing engines have inherent reliability of its engine
not failing, the SEBI too, will never permit such stint by Mr. Reddy.

Unfortunately, every passing day is only causing anxiety amongst the stakeholders on
how MCX will handle its core technology transitioning. Considering that mock runs are
being conducted, MCX can only proceed to switch to its new technology after a series
of mock and parallel run.
As an industry best practice, all exchanges envisaging technology upgradation or

migration conducts stimulation for at least 3-4 months and carries out various tests
such as user acceptance testing, member and empanelled vendor testing, member
mock and finally conducts parallel run for at least 6 months, before the final transition
is done to the new system. Some of the global exchanges, even take consent from
their members before going live with the new system.
In case of MCX it is not a mere version upgrade, but it is complete transformation to a

new end to end technology program from trading to clearing to core systems, by
bringing together multiple systems into it.
For example, the Deutsche Boerse’s T7 trading technology went live for Xetra trading
on the Frankfurt Stock Exchange in July 2017, post a rigorous stimulation of more than
4 months. Similarly, when the oldest exchange of India replaced its existing technology
with Deutsche Boerse’s T7 trading technology, it did so in a phased manner and
conducted parallel test over a period of more than 6 months.
The technology of any exchange is mission critical and even a minor glitch for few
minutes during the active trading session, could lead to chaos and heavy financial
losses to the investing public, apart from loss of reputation to the exchange. MCX being
the leading commodity derivatives exchange in India with almost 96% market share in
value terms, running the exchange platform without vendor support would be suicidal,
as even the smallest glitch or a bug in the system leading to halt in the trading, could
lead to heavy losses to the market participants.
Considering the above, we would like to plead that the MCX Board must intervene
and ensure that the exchange is not run without technical support even for a single
day. The confidence of market participants will be shattered in case MCX under the
leadership of Mr. Reddy takes this suicidal step and that too without intimating the
SEBI. To reduce anxiety, concrete plans with defined timelines should be issued to the
market participants.
This representation is made in larger interest of market participants who participate

at MCX.
Best regards,
Manoj K Sheth
President
CC: -
Smt. Madhabi Puri Buch
Chairperson
Securities and Exchange Board of India (SEBI)
SEBI Bhavan, C4-A, “G” Block,
Bandra Kurla Complex, Bandra East,
Mumbai – 400051


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November 19, 2022

Ref. No. :- CFMA/14/22-23

CHENNAI FINANCIAL MARKETS AND ACCOUNTABILITY

CHENNAI FINANCIAL MARKETS AND ACCOUNTABILITY

As an industry best practice, all exchanges envisaging technology upgradation or

In case of MCX it is not a mere version upgrade, but it is complete transformation to a

This representation is made in larger interest of market participants who participate

CHENNAI FINANCIAL MARKETS AND ACCOUNTABILITY

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