The market regulator, Securities and Exchange Board of India (Sebi) has served a show-cause notice on Financial Technologies (FTIL) calling into question its shareholding in MCX-SX.

In its show-cause notice,  the market regulator has asked four critical questions beginning with why should FTIL be considered ‘fit & proper’ for holding stake in any stock exchange.
Secondly, Sebi asked Why shouldn’t FTIL not be directed to divest its stake and also Why FTIL should not be directed to divest its stake in MCX-SX.

Lastly, it asked why no action should be initiated against FTIL. It is significant to note that FTIL holds a stake not only in MCX-SX but also in MCX-SX Clearing Corporation, the BSE as well as the Vadodra Stock Exchange.

However, FTIL has time till December 26 to come back with its reply to this Sebi show-cause notice. While the FTIL has alleged that FMC has violated principles of natural justice arriving at the conclusion of guilt without any trial, it will still have to contend with the FMC order which came out a few days back.

FTIL appears to be moving fast -- driven by concerns with respect to the GMC directions to divest stake in MCX -- as it has filed a petition in the Bombay High Court.

Further, the line of questioning as well the line of arguments suggests that FTIL is that the principle of natural justice has not be adhered to. FTIL’s contention is likely to be that Jignesh Shah or FTIL have not been deemed guilty by any court of law and hence it would be unfair at least for the FMC to deem them unfit and improper.

One another point that they are expected to raise is that as far as the MCX board is concerned, FTIL has only one nominee and the other nominees, are controlled by the FMC.