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Published on 5 April 2025

SEBI Withdraws Recognition of Indian Commodity Exchange: Legal Insights

Overview of ICEX Recognition Withdrawal by SEBI

The Securities and Exchange Board of India (SEBI) has announced the withdrawal of recognition initially granted to the Indian Commodity Exchange Limited (ICEX). ICEX was initially recognized as an ‘association’ under the Forward Contracts (Regulation) Act, 1952. Following the merger of the Forward Market Commission with SEBI, it transitioned to a deemed stock exchange. In 2022, SEBI withdrew this recognition, but the Securities Appellate Tribunal later set this decision aside with conditions. Subsequently, ICEX sought regulatory relaxations or expressed its desire to voluntarily surrender its recognition. On December 10, 2024, SEBI permitted ICEX to exit as a stock exchange, with specific conditions applying. The withdrawal of recognition becomes effective with the publication of the notification in the Official Gazette.

Legal Framework Governing the Withdrawal

  1. Merger Context: Sub-section (1) of Section 28A of the Forward Contracts (Regulation) Act, 1952 stipulates that after the merger of the Forward Market Commission with SEBI, all associations recognized under the Forward Contracts (Regulation) Act became deemed recognized stock exchanges under the Securities Contracts (Regulation) Act, 1956. Consequently, ICEX was recognized as a deemed stock exchange under this act.

  2. Regulatory Authority: According to Sub-section (1) of Section 5 of the Securities Contracts (Regulation) Act, 1956, and the Notification issued by the Ministry of Finance on September 13, 1994 (S.O. 672 (E)), if SEBI believes that a stock exchange's recognition should be withdrawn in the interest of trade or public welfare, such recognition can be rescinded.

  3. Initial Withdrawal: SEBI exercised its authority to withdraw ICEX’s recognition through an Order dated May 10, 2022, which was published in the Official Gazette on May 18, 2022 (number SEBI/LAD-NRO/GN/2022/86). This Order was contested before the Securities Appellate Tribunal, which, in its Order dated June 13, 2022, set aside SEBI’s May 10 decision but imposed certain conditions.

ICEX's Request and Final Decision

  1. Request for Relaxation: Following the Tribunal’s Order, ICEX submitted a letter on February 22, 2023, requesting SEBI to relax specific regulatory provisions or consider the letter as a formal request to voluntary surrender its recognition.

  2. Final Approval: In response to this letter, SEBI issued an Order on December 10, 2024, allowing ICEX to exit as a stock exchange and subsequently withdraw its recognition, subject to the conditions specified in the Order. This decision will take effect upon publication in the Official Gazette.

Conclusion

In conclusion, by exercising the powers granted under Sub-section (1) of Section 5 of the Securities Contracts (Regulation) Act, 1956, SEBI has formally withdrawn the recognition of the Indian Commodity Exchange Limited. This action will be effective from the date this notification is published in the Official Gazette.