Jignesh Shah resigned from the board of Multi Commodity Exchange of India Ltd., the nation’s biggest commodity trading platform, amid an investigation into the failure of a related spot bourse.
Shah, 46, quit as non-executive vice chairman with immediate effect, according to a filing yesterday from the company he founded in 2003. He said he’s leaving to help ensure investors aren’t harmed by “mud-slinging” over the probe.
India’s commodities futures market regulator has sought an audit of MCX, which counts NYSE Euronext and Fidelity International Ltd. as investors, to examine large expenditures by the company and related-party transactions. The spot bourse being investigated, National Spot Exchange Ltd., which Shah also founded, was ordered by the government in July to halt trading.
“Investors will view Shah’s resignation as a positive,” said Paras Bothra, vice president for equity research at Ashika Stock Broking Ltd. in Kolkata. A change in ownership of MCX is a “distinct possibility,” he said.
Shares of MCX, which controls about 90% of India’s $2.8 trillion commodities futures market, have dropped 26% since July 31, when NSEL suspended trading in most commodities. Financial Technologies (India) Ltd., which owns 26% of MCX, has plunged 68% in the period.
MCX shares closed 1.2% higher at 473.40 rupees in Mumbai yesterday. Financial Technologies ended little changed at 173.40 rupees.
Shah quit the board of the MCX-Stock Exchange Ltd., India’s newest equity bourse, in October.
The now defunct NSEL broke rules by permitting the sale of goods traders didn’t keep in its warehouses, according to regulators.
MCX’s Chief Executive Officer Shreekant Javalgekar, its chairman, and three directors quit recently.
Investors had been calling for Shah’s resignation. His departure may be an attempt to build some confidence in MCX, according to Kishore Narne, head of commodity and currency at Motilal Oswal Commodity Broker Ltd.
Shah said a detailed reply has been sent to the regulator over concerns it raised about MCX.
MCX appointed Pravir Vohra and G. Ananth Raman as independent directors to the board on Oct. 23, and named Parveen Kumar Singhal, a deputy managing director, as the chief executive until a managing director is named.
The Economic Offences Wing of the Mumbai police has arrested NSEL’s former Chief Executive Officer Anjani Sinha and two other senior officials after an investors’ group complained the executives diverted funds and failed to settle about 56 billion rupees ($911 million) in dues to investors.
The NSEL has failed to meet most of the payment targets set under the supervision of the Forward Markets Commission, the commodities futures market regulator.
NSEL and Financial Technologies Group will co-operate with the authorities in the probe, the exchange said in a statement on Sept. 30.