PwC Report Indicts FTIL

Financial Technologies India (FTIL)
  • PwC, an audit firm has indicted Financial Technologies India (FTIL) for its heavy handedness in the matter of Multi Commodity Exchange (MCX), a listed entity.
  • The report says that MCX’s operations, whether it relates to providing the exchange ecosystem framework (for technology solutions and warehousing) or selection of vendors for non-trading transactions, were largely dependent of FTIL, which holds about 26% in MCX, and its group companies.
  • It also said that MCX has not demonstrate the ways with which it mitigated its business and commercial risks arising from related party agreements. This ranges from complexity of contract exit / termination clauses agreed with FTIL or the longevity of tenure of contracts extending from 33 to 99 years in certain cases.
  •  FTIL started its operations as a technology solutions provider to the financial services industry, and later set up exchanges for spot trading including (NSEL), commodity trading (MCX) and equity trading (MCX-SX).
  • The commodity market regulator Forward Markets Commission (FMC) had directed the FTIL to reduce its stake in MCX to less than 2%, and despite its listing MCX continued to operate with proximate participation from FTIL’s senior management.
  • Some associated parties emerged as members, clients, vendors of the commodity exchange of which 5 were identified as recipients of funds of MCX and the total amount of money paid to them by MCX over the review period was Rs. 18.34 crore. Of this, FTIL and NHBC are important ones to which money has been paid by MCX for the exchange technology solutions and warehousing respectively.
  • MCX also entered into related parties transactions with other FT group companies for various ancillary services.  MCX was a significant customer for FTIL by driving around 25% of the FTIL revenues in preceding years.
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Exams Perspective:

  1. Multi Commodity Exchange (MCX)
  2. National Spot Exchange Limited (NSEL)
  3. Forward Markets Commission (FMC)
  4. NSEL Scam