Behind the MCX engine change at 30,000 feet
Migrating to a new technology platform was like changing an airplane engine while flying at 30,000 feet, that too “lock, stock and barrel,” recalls Padala Subbi Reddy, outgoing managing director and chief executive of Multi Commodity Exchange of India Ltd, the country’s largest commodities derivatives exchange.
The technology transition that began in 2021, amid the pandemic-induced lockdowns, was “unprecedented globally” as something like that had never been done in any other exchange that was up and running, said Reddy, whose five-year term at MCX was the most eventful for the bourse that began operations a little over two decades ago.
“What we essentially did was a daredevil act,” Reddy told Mint in a rare interview for the outgoing CEO.
“The task was formidable in that the new platform involved integration of the trading and clearing and settlement systems, made all the more challenging by the regulatory requirements to safeguard our markets against systemic risk. The markets regulator was very cautious given (that it was) the first time such a migration was happening, but they have been very supportive.”
Reddy leaves MCX on 9 May; an internal committee will run MCX until a new CEO is appointed.
In February 2021, MCX awarded Tata Consultancy Services Ltd a contract to implement the new tech platform, christened Project Udaan, by September 2022.
TCS pipped the only other shortlisted candidate, the London Stock Exchange Group, a provider of financial infrastructure and data. Other candidates who had submitted expressions of interest to build the new platform included 63 Moons Technologies Ltd and Nasdaq Inc.
Earlier known as Financial Technologies India Ltd, 63 Moons was the founder of MCX. But it had to divest its 26% stake in the bourse in 2014 following a ₹5,600 crore scam in its subsidiary National Spot Exchange Ltd.
The Forward Markets Commission (FMC), which was then the regulator for the commodity and futures markets in India, declared that 63 Moons was not fit and proper to hold stake in any stock exchange. (The FMC was merged with the Securities and Exchange Board of India in 2015.)
63 Moons, however, was also the technology vendor for MCX, which had renegotiated its contract with 63 Moons in 2014 for eight years through September 2022.
The new platform, however, was delayed by a year with heavy cost overruns—a total of ₹472 crore, against a normal cost of ₹60 crore annually, which dragged down MCX's 2023-24 net profit by 44% to ₹83.1 crore.