Home  »  Company  »  MCX  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of Multi Commodity Exchange of India Ltd.

Mar 31, 2016

Dear Shareholders,

The Board of Directors is pleased to present the Fourteenth Annual Report on the business and operations of your Company along with the audited statement of accounts and the Auditors'' Report for the financial year ended March 31, 2016 (FY16/year under review). The highlights of the financial results for the year under review are given below:

FINANCIAL RESULTS

(Rs. in Million)

Standalone Consolidated

Particulars 2015-16 2014-15 2015-16 2014-15

Total Income 3,326.70 3,322.71 3,333.23 3,326.40

Total Operating Expenditure 1,582.80 1,349.11 1,582.85 1,349.16

Profit before Interest, depreciation, exceptional 1,743.90 1,973.60 1,750.38 1,977.24 items and tax

Less: Depreciation 245.86 259.33 245.86 259.33

Less: Interest 0.38 13.73 0.38 13.73

Profit before exceptional items and tax 1,497.66 1,700.54 1,504.14 1,704.18

Less : Exceptional Items 666.76 - 666.76 -

Profit after exceptional items but before tax 830.90 1,700.54 837.38 1,704.18

Less : Provision for tax 412.62 450.01 413.46 450.09

Profit after tax 418.28 1,250.53 423.92 1,254.09

Add: Share of profits of associate - - 0.86 3.58

Add/(Less): Share of minority interest - - - 0.01

Profit for the year 418.28 1,250.53 424.78 1,257.68

Add: Balance of profit of earlier years 7,698.43 7,242.69 7,723.73 7,260.79

Balance available for appropriation 8,116.71 8,493.22 8,148.51 8,518.47

Less: Appropriations

- Final dividend (Proposed) 331.49 509.98 331.49 509.98

- Tax on Dividend 69.34 101.97 69.34 101.97

- Transfer to General Reserve - 125.05 - 125.05

- Depreciation adjustments due to change in useful life of fixed assets (net of Tax thereon) in - 57.79 - 57.79 accordance with requirement of Schedule II of the Companies Act, 2013

Balance carried to Balance Sheet 7,715.88 7,698.43 7,747.68 7,723.68

Earnings per share (Rs.): Basic 8.23 24.64 8.36 24.78

Diluted 8.23 24.63 8.36 24.77

The audited financial statements for FY16 are recommended for adoption by the shareholders at the ensuing Annual General Meeting (AGM).

RESULTS OF OPERATIONS AND STATE OF COMPANY AFFAIRS

Your Company, India''s No. 1 commodity futures exchange, offers a neutral, secure and transparent online trading, clearing and settlement of commodity futures transactions, thereby providing price discovery mechanism and enabling price risk management through scalable technology platform framework. There was no change in the nature of business of your Company during the year under review. Your Company enjoys a competitive edge due to its domain expertise, experienced leadership team, step ahead in innovation and product mix, multiple domestic and international alliances and robust business model with extensive reach of 709 SEBI-registered members having 49,638 Authorised Persons, operating through 585,190 terminals including Computer-to-Computer Link (CTCL) across 1,705 cities/towns across India as at March 31, 2016.

Your Company, during the year under review, continued to retain a market share of over 84% in terms of the value of commodities futures traded (Source: SEBI Bulletin, April 2016). The average daily turnover during FY 16 was Rs.219.23 billion (single side) as against Rs.203.28 billion during the financial year 2014-15 (FY15/previous fiscal), registering a growth of 7.85%, with a total of 0.33 million clients trading on the Exchange. The total turnover of commodity futures traded on your Exchange stood at Rs.56,341.94 billion in FY16 as against Rs.51,837.07 billion during FY15, registering an increase of 8.69%. The number of contracts traded on your Exchange in FY16 stood at 234.23 million as compared with 148.58 million for FY15, an increase of 57.65%.

MCX crude oil futures, MCX crude oil mini futures, MCX silver micro futures, MCX natural gas futures and MCX copper futures were amongst the top 20 commodity futures and options contracts in the global ranking of commodity futures contracts in Calendar Year 2015 (CY15). (Source: FIA Annual Volume Survey March 2016).

The market share of the Exchange, amongst all national exchanges offering commodity derivatives trading marginally increased to 84.3% in FY16 from 84.1% in FY15.

Despite fall in international prices of commodities mainly traded on its platform, your Exchange, as at December 31, 2015, was ranked sixth in the world in terms of number of contracts traded through commodity futures exchanges, as against seventh position at the end of December 31, 2014 (Source: FIA Annual Volume Survey March 2016). Your Company has been able to achieve this rank by clocking about 62% year-on-year growth in the number of contracts traded, which touched 216.3 million during CY15.

For FY16, your Company''s (standalone) total in come stood at Rs.3,326.70 million as compared to Rs.3,322.71 million during FY15, mainly attributable to fall in prices of key commodities traded on your Exchange and rising interest in other asset classes. The operating income during the year under review was Rs.2,349.28 million as against Rs.2,224.86 million in FY15. Other income during FY16 was Rs.977.42 million as against Rs.1,097.85 million in the previous fiscal, the reduction in income during FY16 was mainly due to the lower interest income on investments on account of fall in general interest rates in the economy. The net profit after tax for the year ended March 31, 2016 stood at Rs.418.28 million as against Rs.1,250.53 million in FY15. The lower net profit of FY16 is mainly attributable to two exceptional items, namely (i) the aggregate loss of Rs.610.45 million due to diminution and provision on account of the investments in Metropolitan Stock Exchange of India Limited (MSEI) (formerly MCX-Stock Exchange Limited) and (ii) transfer of penalties to Multi Commodity Exchange Investor (Client) Protection Fund (IPF) for earlier fiscals (i.e. 2007-08 to 2011-12) amounting to Rs.56.31 million, pursuant to regulatory requirements. For details please refer Note no. 34(b) of notes forming part of the standalone financial statements and/or Note no.35(b) of notes forming part of the consolidated financial statements of the Annual Report. The net worth (including Settlement Guarantee Fund) as at March 31, 2016 stood at Rs.13,918.47 million.

REGULATORY CHANGES: MERGER OF FMC WITH SEBI

The commodity derivatives exchanges which were regulated by the Forward Markets Commission (FMC) under the Ministry of Finance, Government of India are, consequent upon the merger of FMC with the Securities and Exchange Board of India (SEBI) with effect from September 28, 2015, being regulated by SEBI. Upon the said merger and the consequent repeal of Forward Contracts (Regulation) Act, 1952 (FCRA), your Company, being a recognised association under FCRA, is now deemed to be a recognised stock exchange under the Securities Contracts (Regulation) Act, 1956 (SCRA). The rules, directions, guidelines, etc., issued by FMC or the Central Government are to remain in force for a period of one year from September 28, 2015 or till such time as notified by SEBI. Accordingly, pursuant to the power vested for regulating stock exchanges, SEBI has vide circular dated November 26, 2015, stipulated timelines for commodity derivatives exchanges complying with various provisions of SCRA, the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, (SECC Regulations) and SEBI Circular no. CIR/MRD/ DSA/33/2012 dated December 13, 2012, on ''Procedural Norms on Recognition, Ownership and Governance for Stock Exchanges and Clearing Corporations'' (Procedural Norms). SEBI has allowed time up to one year from September 28, 2015 for commodity exchanges to comply with, barring certain requirements, as have been notified by SEBI and applicable to stock exchanges.

The SECC Regulations, inter alia, prescribe the eligibility for acquiring or holding shares by stakeholders who need to comply with the fit and proper criteria provided in the SECC Regulations.

Further, SEBI has, vide its circular dated January 01, 2016, issued detailed guidelines for monitoring the shareholdings in listed stock exchanges. The said circular, inter alia, prescribes modalities to ensure compliance with the provisions of SECC Regulations by the listed stock exchange and depositories. Your Company, being the only listed stock exchange, has implemented the same to the extent possible and for remaining aspects is coordinating with the National Securities Depository Limited, Central Depository Services (India) Limited, BSE Limited (BSE), the National Stock Exchange of India Limited (NSE) and Karvy Computershare Private Limited, the Company''s Registrar and Share Transfer Agents.

The presence of SEBI as the market regulator is expected to help build the confidence in the market and trust amongst all the financial and commodity markets ecosystem stakeholders and make the commodity markets more vibrant and build a level-playing field across both the commodities and securities markets. The merger of regulators has changed the landscape of commodities derivatives market in India, paving the path for introduction of new products in commodity derivatives market, and likely participation of institutions such as banks, mutual funds and insurance companies.

Apart from stronger regulation of the commodity market, the changes in the legal structure governing the commodity derivatives market hold a lot of promise for your Company. As commodity derivatives are classified as ''securities'' under SCRA, there is no legal bar on introducing additional types of derivative products, subject to regulatory approval. The Union Finance Minister, while presenting the Budget 2016, announced that new derivative products will be developed by SEBI in the commodity derivatives market. Thus, we could witness the launch of new types of derivative products such as commodity options and trading in commodity indices in the Indian commodity derivative market as soon as the regulatory guidelines for the same are announced.

SEBI has introduced measures in commodity derivatives markets to bring the exchanges on par with those in commodity derivatives securities markets. Details of these measures are included in the section titled ''Initiatives and Outlook'' in this Report.

PARTICULARS UNDER THE FORWARD CONTRACTS (REGULATION) ACT, 1952 READ WITH THE FORWARD CONTRACTS (REGULATION) RULES, 1954

As the Exchange was under regulatory ambit of FMC up to September 27, 2015, and in terms of the provisions of Section 9(2) of FCRA read with Rule 12 of the Forward Contracts (Regulation) Rules, 1954, commodity exchanges were required to include certain particulars in their Annual Reports. The Company has included the requisite particulars as Annexure I to Annexure VIII to the Directors'' Report.

RISK MANAGEMENT AND RISK MANAGEMENT POLICY

SEBI has permitted commodity exchanges to continue with the existing arrangement for clearing and settlement of trades, requiring them to transfer the functions of clearing and settlement of trades to a separate clearing corporation within three years from September 28, 2015. However, subject to receipt of requisite approvals, your Company is taking effective steps to transfer these functions to a separate clearing corporation, much in advance. Pending the transfer of clearing and settlement functions, your Company has complied with SECC Regulations relating to risk management. Your Board has re-constituted the Risk Management Committee in line with SECC Regulations, which was erstwhile constituted as mandated by FMC. The said Committee as on the date of this Report comprises one Independent Director, one Shareholder Director and one Independent External Expert. The constitution of the said Committee as at March 31, 2016 is covered in Annexure I to this Report. A comprehensive Risk Management Policy for managing different risks including business risk, default risk, settlement risk, market risk, legal risk, operational risk, technological risk and delivery risk has been approved and is being implemented.

Your Company''s operations are highly technology dependent. As part of risk mitigation plans your Company has focused its attention on ensuring uninterrupted services by strengthening its technology infrastructure to avoid instances of failure. Your Company has its Data Centre in Mumbai. Its Disaster Recovery Site (DRS) at New Delhi has been recently upgraded. Further, your Company has setup a Near Site in Mumbai with synchronous data replication to achieve zero data loss in case of any eventuality.

Your Company has strengthened its Business Continuity Plan (BCP) and regularly conducts mock drills to test readiness and effectiveness of IT infrastructure at its Data Centre as also its DR site. Details of some of the risks and their impact on your Company''s business are covered in the Management''s Discussion and Analysis section of the Annual Report.

INVESTOR (CLIENT) PROTECTION FUND

Your Company has established Multi Commodity Exchange Investor (Client) Protection Fund Trust (IPF) to protect and safeguard the interests of investors (clients) by meeting their eligible/legitimate claims on account of default by any trading and clearing member of the Exchange. The interest income received by investment of surplus funds of IPF is used for meeting expenses for imparting investors (clients) education, conducting awareness programmes, undertaking research or such other programmes as may be specified by SEBI and jointly undertaken with SEBI or the Company alone. As on March 31, 2016, the corpus of IPF Trust stood at Rs.1,186.70 million. Details of transactions entered into with IPF are disclosed as per Accounting Standard 18 (AS-18) in the financial statements of your Company.

SETTLEMENT GUARANTEE FUND

Pursuant to circular dated March 14, 2014 issued by FMC with respect to the Settlement Guarantee Fund (SGF), stress tests are required to be performed at the end of every calendar quarter, including the financial year end, to determine the adequacy of balance in SGF to meet claims made under SGF. Accordingly, based on the stress tests performed at the end of FY16, the balance in SGF was determined to be adequate and hence no contribution to SGF has been made during the year under review.

Further, pursuant to the then directives of FMC, settlement related penalties and fines amounting to Rs.8.33 million (net of tax) and income of Rs.106.20 million (net of tax) earned from earmarked SGF investments were credited to the SGF during the year. Accordingly, the cash component of SGF stood at Rs.1,879.25 million as at March 31, 2016 after effecting the aforesaid transfers, and net addition of Base Minimum Capital of Rs.14.43 million, reduced by appropriations during the year from SGF of dues amounting to Rs.120.87 million of defaulting members.

WAREHOUSING

To cater to the storage requirements of various members of the Exchange and their respective constituents/depositors who are willing to store goods and give delivery on Exchange platform, your Company has made necessary warehousing and logistics arrangements with Warehouse Service Providers (WSP). Your Exchange co-ordinates with WSPs and undertakes hiring, audit and inspection of warehouses for safe storage and preservation of goods deposited by various business participants for delivery on its platform.

Currently, your Company operates with three WSPs for facilitating physical deliveries in agricultural commodities, viz., Sohanlal Commodity Management Private Limited, Origo Commodities Private Limited and Yamada Logistics Private Limited. As on March 31, 2016, your Exchange has accredited 28 warehouses of these three WSPs. Out of the 28 warehouses, 12 warehouses are registered with the Warehousing Development & Regulatory Authority (WDRA) and 16 warehouses are in different stages of registration. The warehouses, as on the date of this Report, are located at Jalgaon, Jalna, Yavatmal in Maharashtra and Kadi, Rajkot in Gujarat for Cotton Bales, Vandanmedu in Kerala for Cardamom and Barabanki and Chandausi in Uttar Pradesh for Mentha Oil.

Your Company operates with Lemuir Secure Logistics Private Limited for facilitating physical deliveries in bullion. The vaults of this agency are located at Ahmedabad, Mumbai and New Delhi.

SHARE CAPITAL

There was been no change in the share capital of your Company during the year under review. As on March 31, 2016, the paid-up share capital of your Company stood at Rs.509.99 million comprising 50,998,369 equity shares of Rs.10 each fully paid.

Your Company has, during the year under review, neither issued any equity shares with differential voting rights nor any shares (including sweat equity shares) to its employees under any scheme save and except transfer of shares by the ESOP trust to eligible employees pursuant to the Employee Stock Option Scheme (ESOP 2008).

DIVIDEND

Your Directors have recommended, for the financial year ended March 31, 2016, a dividend at the rate of Rs.6.50 per equity share on a face value of Rs.10 per share, aggregating Rs.331.49 million, subject to the approval of shareholders at the ensuing AGM. Though the rate of proposed dividend at 65% is lower as compared to 100% declared for the previous financial year, the outgo on account of the proposed dividend and tax thereupon to be paid by the Company aggregates Rs.400.83 million (including the Dividend Distribution Tax of Rs.69.34 million), which works out as payout of 96% of the profit after tax for the year ended March 31, 2016 as against Rs.611.95 million for FY15 (49% payout).

TRANSFER TO RESERVES

For the year ended March 31, 2016, your Directors do not propose to transfer any amount to the General Reserve. An amount of Rs.7,715.88 million is proposed to be retained as a surplus in the statement of Profit and Loss Account under the heading ''Reserves and Surplus''

DEPOSITS

Your Company had not invited any deposits from the public, and as such, no amount on account of principal or interest related thereto was outstanding as on the date of the Balance Sheet i.e., March 31, 2016.

PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN OR SECURITY PROVIDED UNDER SECTION 186 OF THE COMPANIES ACT, 2013

Your Company has, during the year under review, not given any loans, guarantees or provided security and has not made any investments in any body corporate in excess of limits specified under Section 186 of the Companies Act, 2013. The details of investment in MSEI, consequent to conversion of warrants into equity shares of MSEI, are given in the later part of this Report.

CONSOLIDATED FINANCIAL STATEMENTS

The audited annual Consolidated Financial Statements, which incorporates the figures based on the financial statements received from your Company''s subsidiary and Associate as approved by their respective Board of Directors, have been prepared in accordance with the requirements of Accounting Standard 21 (AS-21) - ''Consolidated Financial Statements'', Accounting Standard 23 (AS-23) - ''Accounting for Investments in Associates in Consolidated Financial Statements'' as notified under the Companies (Accounting Standards) Rules, 2006, the Listing Agreement and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), as applicable and as prescribed by SEBI forms part of this Annual Report, and are reflected in the consolidated accounts of your Company. The said details are more particularly covered in the Notes to Accounts in the Annual Report.

SUBSIDIARIES AND ASSOCIATES

In accordance with Section 129(3) of the Companies Act, 2013 your Directors have prepared consolidated financial statement of your Company and its subsidiary company(ies) which is forming part of Annual Report. The Consolidated Financial statement includes financial information of its subsidiary Company i.e. Multi Commodity Exchange Clearing Corporation Limited (''MCX CCL'') for the entire year and its associate i.e. Metropolitan Clearing Corporation of India Limited (MCCIL) (earlier known as MCX SX Clearing Corporation Limited) till June 30, 2015. A report on the performance and financial position/salient features of the Subsidiary Company and Associate, as per the Companies Act, 2013 is provided as Annexure IX to this Report.

SUBSIDIARIES:

Multi Commodity Exchange Clearing Corporation Limited: Multi Commodity Exchange Clearing Corporation Limited (MCX CCL), a wholly-owned subsidiary of your Company, was set up for the purpose of having a separate clearing house to provide services such as clearing and settlement of trades and guaranteeing counter party risk. Its present paid-up capital is ''60 million. As on date, MCX CCL has not commenced business. In terms of circular dated November 26, 2015 issued by SEBI, commodity derivatives exchanges shall transfer the functions of their clearing and settlement of trades to a separate clearing corporation within three years (i.e. September 27, 2018). Till then, the exchanges may continue with the existing arrangement for clearing and settlement of trades.

Your Company proposes to operationalise MCX CCL by infusion of additional capital to meet the minimum capital criteria required for a clearing corporation and put in place systems and processes to enable it to commence its operations during the financial year 2017-18. Necessary steps for ensuring this are being taken.

Shareholders interested in obtaining a copy of the audited annual accounts of MCX CCL may write to the Company Secretary at the Company''s registered office. Copies of the annual accounts of your Company and that of MCX CCL would be kept at the registered office of your Company for inspection by any shareholder.

SME Exchange of India Limited: SME Exchange of India Limited (SME), a subsidiary of your Company was set up with paid-up capital of Rs.1 million, to provide a platform for transacting, clearing and settlement of trades in small and medium enterprises segment.

However, considering the non-commencement of its business since incorporation and there being no possibility of commencing its business in the foreseeable future, the members of SME, approved the members'' voluntary winding up and the appointment of a liquidator for the same.

The liquidator has realised all the assets, paid off the liabilities and returned the share capital to the respective shareholders. Further, the members of SME at their final General Meeting held on March 28, 2016, have approved the accounts giving details about the manner in which the winding up has been conducted and disposal of realised assets, as submitted by the Liquidator. The requisite filing with the Registrar of Companies and the Official Liquidator has been done. Final order of dissolution is awaited.

Further, neither the Managing Director and Chief Executive Officer nor the Whole-time Directors of your Company receive any remuneration or commission from its subsidiary companies.

Associate:

Metropolitan Clearing Corporation of India Limited (MCCIL) earlier known as MCX SX Clearing Corporation Limited: MCCIL, a subsidiary of MSEI was an associate of your Company as per Accounting Standard- 23, till July 1, 2015. Consequent to the rights issue and resultant increase in MCCIL''s paid-up capital, initially from Rs.250 million to Rs.450 million and subsequently from Rs.450 million to Rs.700 million your Company''s stake in MCCIL was reduced from 26.00% to 14.44% on July 02, 2015 and from 14.44% to 9.29% on October 01, 2015. Consequently, MCCIL ceased to be an associate of your Company effective from July 02, 2015.

In accordance with Section 136(1) of the Companies Act, 2013, the financial statements including consolidated financial statements and all other documents required to be attached thereto and the audited annual accounts of MCX CCL has been placed on the web site of your Company, under URL - https://www.mcxindia.com/docs/default-source/ investor-relations/mcx_annual_report_fy2016.pdf

Save and except as mentioned above and elsewhere in the Report, during the year under review, there have been no companies which have become or have ceased to be subsidiaries or associate companies of your Company.

MANAGEMENT''S DISCUSSION AND ANALYSIS STATEMENT

Management''s Discussion and Analysis Statement, as stipulated under Regulation 34(2)(e) of the Listing Regulations forms part of this Annual Report.

INITIATIVES AND OUTLOOK

The year 2015-16 witnessed one of the profound changes in the evolution of the commodity derivatives market in India. FMC was formally merged with the SEBI on September 28, 2015 in line with the announcement made in the Union Budget 2015-16. Similarly, with the passage of the Finance Act, 2015, commodity derivatives were brought under the ambit of SCRA. Commodity derivatives are now being re-defined in a manner which is wider in scope than what was defined in FCRA. More significantly, all recognised associations under the FCRA are deemed to be recognised stock exchanges under SCRA.

During the year, the regulatory authorities, i.e. the erstwhile FMC and SEBI, undertook various policy measures to improve market transparency, accessibility and participation and to protect clients'' interests.

With a view to synchronize practices at commodity derivatives exchanges with those at stock exchanges, a series of regulatory initiatives have been effected in the market by SEBI, by strengthening risk management and other parameters to augment the process of market development.

An important policy change pertains to the definition of ''commodity derivatives'' under SCRA. This change in the definition would facilitate introduction of new products such as options and indices, and products on weather and freight, etc. A detailed analysis with respect to the same is covered under this section and in the Management''s Discussion and Analysis portion of the Annual Report.

Measures taken by erstwhile FMC, SEBI and the Government of India in the area of commodity derivative markets are listed below:

- SEBI by its circular dated January 01, 2016 has brought in comprehensive guidelines for monitoring shareholding in commodity derivatives exchanges and to ensure compliance with the requirements under SECC Regulations.

- Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India has issued a circular for Consolidated FDI Policy of 2016 (Effective from June 07, 2016) wherein composite caps for all types of foreign investments, direct and indirect falling under automatic route of 49% has been prescribed for Commodity exchanges.

- The Department of Industrial Policy & Promotion (FC-1) Section, Government of India, vide Press Note No. 8 (2015 Series) dated July 30, 2015 has, with a view to bring uniformity and simplicity across all sectors in its FDI Policy, stipulated with effect from May 12, 2015 a composite cap for foreign investments. In terms of paragraph no. 6.2.18.4.2 of the said Press Note, the composite cap of 49% for all types of foreign investments - direct and indirect falling under automatic route has been prescribed for commodity exchanges.

- In terms of SECC Regulations, no single foreign investor can invest more than 5% in the equity of stock exchanges. The Union Cabinet at its meeting held on July 27, 2016 has given its approval for raising foreign shareholding limit from 5% to 15% in stock exchanges. The Cabinet has also approved the proposal to allow foreign portfolio investors to acquire shares through initial allotment, besides secondary market, in the stock exchanges. Necessary circulars, notifications etc. are awaited in this regard. This limit would the applicable to commodity exchanges also.

- Circulation of RBI notification of May 28, 2015 by FMC, which advised banks to encourage large agricultural borrowers to hedge their risks on agricultural commodities. Towards this end, FMC suggested exchanges to conduct joint awareness programmes with nationalized banks.

- Permitting exchanges to utilize the interest portion of their IPF corpus for maintenance of price ticker boards installed by the respective exchanges under the Price Dissemination Project.

- Allowing exchanges to utilize the interest income of IPF for conducting programmes on investor education and awareness, including a targeted campaign about dabba trading.

- Revision in closing time of trade timings in internationally linked agricultural commodities to 9.00/9.30 p.m. from 11.00/11.35 p.m. (depending on the daylight savings in the U.S.) based on feedback received from exchanges. The revised trade timings on national commodity derivatives exchanges came into effect from July 13, 2015.

- SEBI, by its circular dated November 26, 2015, announced time lines for compliance with various provisions of securities laws by commodity derivatives exchanges.

- Mandated a review of capacity planning framework to ensure availability of exchange infrastructure, especially the trading, clearing and settlement systems at all times and not limited by capacity constraints.

- All existing members of commodity exchanges who satisfy the eligibility requirements of membership to apply for SEBI registration by December 28, 2015. Further, members were required to meet the eligibility criteria as specified under Rule 8 of the Securities Contracts (Regulation) Rules, 1957 (SCRR) by September 28, 2016. Regulatory fees of Rs.200 per million (Rupees) of turnover to be paid by members dealing in commodity derivatives from September 28, 2015.

- Comprehensive risk management framework implemented with the objective of aligning and streamlining the risk management framework across national commodity derivatives exchanges. Extreme Loss Margin of 1% was introduced.

- Commodity derivatives exchanges instructed to comply with the guidelines issued by SEBI for Annual Systems Audit, Business Continuity Plan (BCP) and Disaster Recovery (DR) to ring-fence exchanges from potential disasters that could disrupt trading systems and that may have an adverse effect on market integrity and the confidence of investors. These guidelines were earlier applicable to stock exchanges.

- Commodity derivatives exchanges to comply with various circulars issued earlier by SEBI for Investor Grievance Redressal System and Arbitration Mechanism, in line with the securities markets.

- To strengthen the testing of software before deployment in order to avoid any trading disruptions due to software malfunctions, SEBI has mandated that the provisions of its earlier circulars for securities markets on testing of software used in or related to Trading and Risk Management need to be complied by the commodity derivative exchanges.

- Revision in Daily Price Limits and Position Limits for agricultural commodity derivative contracts.

- Suspension oftrading in forward contracts.

- Guidelines for streamlining the provisions of modifying client codes after execution of trades on national and regional commodity derivative exchanges in line with the practices in the securities market.

- To increase transparency in the dealings between brokers and clients in the commodity derivatives markets, SEBI issued circular dated April 25, 2016 to align the provisions relating to proprietary trading in the commodity derivatives markets in line with the securities markets.

- Guidelines on cyber security and cyber resilience framework of national commodity derivative exchanges, to bring the cyber security framework of commodity exchanges at par with stock exchanges.

- Securities and Exchange Board of India IFSC Guidelines, 2015 were issued, which specified that''commodity derivatives'' would be eligible as securities for trading on stock exchanges operating in International Financial Services Centers (IFSC).

- Mandatory requirements/Exit Policy issued for commodity derivatives exchanges.

- The Listing Regulations, which, inter alia, mandates listed companies to disclose in their Annual Reports their commodity price risk and hedging activities.

- In January 2016, SEBI constituted an advisory committee, called the Commodity Derivatives Market Advisory Committee to discuss issues relating to regulation and development of commodity markets and suggest ways to address them. It has representation from the major exchanges, including your Company and the regulator, apart from select subject matter experts

APPROVAL FOR THE GOODS AND SERVICES TAX

The Constitution (122nd Amendment) Bill, 2015 for the roll out of the Goods and Service Tax (GST) was passed by the Lok Sabha on August 08, 2016 after it was passed earlier by the Rajya Sabha. Upon implementation of the GST, it has the potential to bestow significant gains to the commodity derivatives market. Currently, a plethora of state and central level indirect taxes are applicable to the trades done on the commodity derivative markets, rendering it inefficient with cascading effect on the cost of participation in these markets. A significant cost in trading of commodities across state borders arises due to taxes imposed on inter-state movement of commodities. Commodities attract Octroi when they enter the civic limits of cities, adding to other mandatory transaction costs. Moreover, differential state-level taxes such as value added tax (VAT) also distort the trade of commodities and make commodity derivatives an ineffective tool for hedging. These differential taxes mean that economic decisions regarding storage and trade are influenced by tax differences across states rather than being guided by pure economic rationale. For instance, the value added tax that a gold trader pays on purchase of gold is set-off/adjusted when the said trader sells the same gold, but only as long as both transactions take place in the same state. If the second transaction occurs in a different state, the said trader cannot get the benefit of set-off. Such a taxation system is tantamount to double taxation, which not only breeds inefficiency in transacting in commodities but also prevents the creation of a pan-Indian market for commodities. Hopefully, the GST regime will remove these anomalies.

OPPORTUNITIES FOR THE COMPANY

Your Company is committed to explore and exploit all opportunities available in the commodity derivatives market. With the policy changes as enumerated above and introduction of new products, this potential may be realized soon. Your Company is taking all possible steps to realize this potential.

To adopt the best global practices in its operations, product designing and processes, your Company has tied up with several global institutions. During the year, your Company and Chicago Mercantile Exchange (CME) Group signed a Memorandum of Understanding (MOU) on various activities of cooperation and have explored potential business opportunities, including a joint viability study being undertaken for setting up operations in the International Finance Service Center in India. Under this MOU, various initiatives between your Company and CME Group are proposed, including the establishment of a joint working group to explore opportunities to develop and market new products and services for the US and Indian markets, as well as collaboration on customer education.

Your Company is taking effective steps to extend Licensing Agreement between your Company and CME Group which would enable settlement of your Company''s Rupee denominated Crude Oil and Natural Gas contracts basis CME group''s NYMEX prices to cover new products.

Your Company and GIFT SEZ Limited, a wholly owned subsidiary of Gujarat International Finance Tec-City Company Limited (GIFTCL) at GIFT City, Gandhinagar signed a MOU in August 2015 for setting up of an International Exchange that will provide an electronic platform for facilitating trading, clearing and settlement of securities, commodities, interest rates, currencies, other classes of assets and derivatives to international investors in GIFT SEZ-IFSC. Your Company would take further steps to set up the said international exchange once the regulatory guidelines and other policies of the government are issued for entities to be set up at the GIFT City.

In April 2016, an addendum was signed to the existing MOU between your Company and China-based Dalian Commodity Exchange to extend strategic co-operation.

During the year under review, your Company has signed MOUs with eight educational universities and institutions - Amity Business School (Uttar Pradesh), Banasthali University (Rajasthan), Chitkara University (Punjab), Christ University (Karnataka), ITM Group of Institutions (Maharashtra), KIITS School of Rural Management (Odisha), Kredent Eduedge (West Bengal) and N. L. Dalmia Institute of Management Studies and Research (Maharashtra) thereby re-emphasizing its commitment toward financial literacy in commodity derivatives and its endeavour in reaching out to a larger number of market participants.

Subsequently, since April 01, 2016, MoUs have been signed with Mandsaur University in Madhya Pradesh, Marwari University in Gujarat and Vinobha Bhave University in Jharkhand.

In view of the need for spreading education about the commodity market, your Company started offering its flagship training and certification programme on commodity markets, MCX Certified Commodity Professional (MCCP) programme examination in two regional languages - Gujarati and Hindi, besides English. In all, during FY16, 1,228 candidates applied for taking the MCCP examination and 700 candidates had cleared the same.Till the date of this report since April 1, 2016, 228 candidates have applied for, out of which 135 candidates have cleared the MCCP examination. Your Company also conducted 5 development programs during the year for the faculty members of Banasthali University in Rajasthan, Christ University in Karnataka, ICFAI Institute for Higher Education in Telangana, KIITS School of Rural Management in Odisha and ITM Group of Institutions in Maharashtra. Additionally, awareness programmes for students pursuing higher education were conducted in 5 institutions during the year.

COMMITMENT TO QUALITY

With a quest to achieve excellence in products and services offered, your Company continues to monitor and maintain its effective and well-crafted Quality Management Framework (QFM). QFM is aligned to the business objectives of the Exchange, and ensures that your Company is focused on maintaining Quality Centric Approach for its members and clients. Your Company is focused on continually improving its existing robust processes and quality services. Over the years, your Company has evolved mature processes and improving them continuously, which assist in commendably reducing unpredictability across various business operations. Your Company successfully cleared the ISO 9001:2008 Surveillance Audit this year, after rigorous process audits across all its key operations. This showcases your Company''s dedication and commitment towards sustaining a customer centric and robust Quality Management System.

In line with your Company''s vision and commitment of ensuring information security and providing assurance to its stakeholders, your Company has developed and implemented simple, effective and robust processes and controls using latest international standard ISO/IEC 27001:2013 on Information Security Management System. It has also deployed a proactive Information Risk Management approach, and carries out risk assessment activities on a periodic basis. This year, Information Security Management System of your Company underwent stringent information security related audits, and successfully completed ISO/IEC 27001:2013 surveillance audit.

RESEARCH AND DEVELOPMENT

As a result of constant research and development, your Company continuously strives to offer new, innovative services and wide-ranging products using latest Information Technology in the realm of Commodity Futures. Moreover, your Company introduces various products like tick-by-tick data so as to meet the needs of a wide range of market participants. Your Company is also working on to shift its development and software test environments over cloud to make effective and efficient use of IT resources.

AWARDS

The initiatives for growth and market development taken by your Company have been recognized at various forums by several institutions. Your Company was honoured with the ''Best Commodity Exchange'' award at the 14th Commodity Futures Market Summit & Excellence Awards, organised by the Association of Chambers and Commerce of India (ASSOCHAM) in New Delhi on February 03, 2016. Your Company was also honoured with the ''Exchange of the Year for Investors Education and Awareness Award'' by the Commodity Participants Association of India (CPAI) on May 30, 2015 and with the ''Best Commodity Exchange'' award on December 01, 2015 at the India International Bullion Summit (IIBS) 2015 for its services to bullion industry.

ENVIRONMENTAL RESPONSIBILITY

Given the nature of its operations, your Company has a very low impact on the environment. Notwithstanding this, it is committed to minimising its environmental impacts through efficient use of natural resources, including electricity, which is the key touch point of the Exchange''s technology-driven business. Your Company has an effective Environmental Policy and is governed by it. Your Company believes that in order to meet the objectives of its Environmental Policy, employee commitment is imperative. Thus, your Company through its Corporate Social Responsibility (CSR) team creates awareness amongst employees and encourages them to adopt conservation practices. Your Company cleared the ISO 14001:2004 surveillance audit, and continues to monitor its Environment Management Plan, which is developed on the basis of the Environment Review conducted annually to assess the impact of the Company''s activities. Your Company has also developed an e-waste policy for the safe disposal of e-waste from its premises. Its tie-up with authorised e-waste recyclers helps it to dispose its e-waste in an eco-friendly manner. The e-waste disposal is in turn minimised through best practices in maintenance and re-use of resources.

CORPORATE SOCIAL RESPONSIBILITY

Your Board constituted a CSR Committee at its meeting held on December 26, 2013 and the same has been re-constituted from time to time. The Corporate Social Responsibility Policy guides the Company''s CSR approach including but not limited to rural development, women and children empowerment, promoting education, health care, sanitation, environment conservation, etc., and the same is available on your Company''s web link viz. URL: https://www.mcxindia.com/about-us/csr Your Company views CSR activities as an opportunity to serve the interest of community at large. The potential opportunities arising from CSR activities improve the welfare of the communities and people and enhance the value of your Company''s business interests and adds to the ''human touch''. This critical function goes beyond mere philanthropy, and promotes inclusion, the major plank of your Company''s business philosophy. Your Company has resolved to engage and motivate employees for active participation in the CSR activities of the Company. The CSR policy is in line with the activities mentioned under Schedule VII to the Companies Act, 2013. Your Company is implementing and monitoring the CSR activities in letter and spirit, and has approved projects for providing infrastructure for schools, empowerment/ training of women and youth, water shed programs, empowering farmers by strengthening the Gram Suvidha Kendra activities, etc. during the year.

During FY2016 the expenditure on CSR activities of the Company amounted to Rs.29.69 million, as against Rs.52.32 million, constituting 2% of the average of three years'' net profit (before tax) required to be spent in terms of Section 135(5) of the Companies Act, 2013.

The details of CSR activities and Annual Report on CSR activities under Section 135 of the Companies Act, 2013 along with the reasons for not being able to spend the balance of the prescribed amount are provided in Annexure X of this Report.

EXTRACT OF ANNUAL RETURN

An extract of Annual Return of your Company pursuant to Section 92(3) of the Companies Act, 2013 read with Rule 12(1) of the Companies (Management & Administration) Rules, 2014 in Form MGT-9 is attached as Annexure XI to this Report.

CORPORATE GOVERNANCE

Your Company continues to be committed to good corporate governance aligned with the best corporate practices. The report on corporate governance, stipulated by Regulation 34 of Listing Regulations and certificate from a Practicing Company Secretary regarding compliance with corporate governance norms, forms part of this Annual Report. The Corporate Governance Report also contains certain disclosures required under the Companies Act, 2013.

ETHICS AND GOVERNANCE POLICIES

Your Company adheres to ethical standards to ensure integrity, transparency, independence and accountability in dealing with all stakeholders. Accordingly, your Company has adopted various codes and policies to carry out the duties in an ethical manner. Some of these codes/policies framed and implemented by your Company are Code of Conduct and Code of Ethics, Code of Conduct for Prohibition of Insider Trading, Vigil Mechanism/Whistle Blower Policy, Policy on Materiality of Related Party Transactions and on dealing with Related Party Transactions, Policy for determining Material Subsidiaries, Corporate Social Responsibility Policy, Risk Management Policy, Nomination and Remuneration Policy, Policy for appointment of Independent External Persons on Committees of the Board, Board Diversity Policy, Dividend Distribution Policy, Preservation and Retention of Documents Policy, Policy for Disclosure of Material Events or Information and policy relating to avoidance of conflict of interest.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

Your Company believes in conduct of its affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behaviour. Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Regulation 22 of the Listing Regulations, the Board of Directors have implemented a vigil mechanism through adoption of Whistle Blower Policy. For further details, please refer Corporate Governance Report forming part of this Annual Report.

Your Company''s Board hereby affirms that no personnel of the Company have been denied access to the Audit Committee and that no complaints were received during the year under review.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

The policy on materiality of related party transactions and dealings with related party transactions as recommended by the Audit Committee that was approved and adopted by the Board at its meeting held on February 13, 2015. The Policy is amended from time to time to incorporate the change/ amendments prescribed under various Laws, Rules and Regulations as are applicable to your Company. The same is uploaded on the website of your Company and may be accessed at the web link:

https://www.mcxindia.com/docs/default-source/investor-relations/ corporate-governance/amended_policy_on_related_party_transactions_ 05may2016.pdf?sfvrsn=2

All related party transactions entered into by your Company, are in the ordinary course of business and at arm''s length pricing basis.

All the related party transactions/financial commitments etc., entered into by your Company during the year under review, were placed and approved/ratified by the Audit Committee and/or by the Board, as applicable, in accordance with the Companies Act, 2013, the directions of FMC and Regulation 53(f) of Listing Regulations.

SEBI directions provide that every national commodity derivatives exchange shall credit penalties, other than the settlement related penalties, to its Investor Protection Fund, for all transactions executed on the Exchange. IPF is held in trust and managed by the Trustees, who are appointed as per the provisions of the Trust Deed and the Rules, Bye- Laws and Regulations of the Exchange. The transactions with IPF are regulated in accordance with the regulatory requirements/guidelines issued from time to time and is independently managed. Except for complying with the regulatory requirements, your Company does not have any pecuniary relationship with IPF. However, in view of clarification issued by Institute of Chartered Accountants of India, IPF is being treated as a related party and as such, transactions entered into by your Company with IPF entails a reporting requirement without the need for following other concomitance of a Related Party Transaction Policy. Accordingly, approval of shareholders is being sought at the ensuing AGM for the related party transactions with IPF.

Pursuant to Section 134(3) (h) read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of material contracts or arrangements with related parties to be reported under Section 188 (1) of the Companies Act, 2013 is appended in Form AOC - 2 as Annexure XII to this Report.

All Related Party Transactions as required under Accounting Standards 18 (AS-18) are reported in Note no. 28 of Notes to Accounts of the standalone financial statements and Note no. 29 of Notes to Accounts of the consolidated financial statements of your Company.

MEETINGS OF THE BOARD

During FY16, ten meetings of the Board of Directors were held. For further details, please refer Corporate Governance Report forming part of this Annual Report.

DIRECTORS

Your Company being a commodity futures exchange and now recognised as a ''deemed stock exchange'' as per SCRA is, inter alia, regulated by SEBI. The appointment of all Directors on the Board of your Company, was earlier with the approval of FMC and post its merger with SEBI, effective September 28, 2015, by SEBI.

As on the date of this Report, your Board of Directors comprises fifteen Directors, of which seven Directors are categorized as Public Interest Directors, seven Directors are Shareholder Directors (including President and Whole Time Director) and the Managing Director.

''Public Interest Director'', for a recognised stock exchange, means an Independent Director, representing the interests of investors in securities market and who is not having any association, directly or indirectly, which in the opinion of SEBI, is in conflict with his role and accordingly such directors may be categorized as ''Independent Directors'' for the purpose of and for fulfilling the conditions prescribed by the Companies Act, 2013 and the Listing Regulations.

Non-executive Directors are paid sitting fees for attending meetings of the Board and its committees which is within the limit as specified under the Companies Act, 2013 and the rules framed thereunder. They are reimbursed out-of-pocket expenses, if any, relating to travel and hotel accommodation required for the purpose of attending meetings of the Board or Committees.

Your Company has received confirmations from all its Public Interest Directors to the effect that each of them meets the criteria of independence as prescribed under Regulation 16 of the Listing Regulations as well as under Section 149(6) of the Companies Act, 2013. The nomination/appointment of Independent Directors/Public Interest Directors on the Board of your Company is also in accordance with the eligibility conditions prescribed by FMC/SEBI.

Further, all Directors have confirmed that they are ''Fit and Proper'' persons in terms of the SECC Regulations. Your Company has also obtained from all its Directors affirmation of adherence to Schedule IV of the Companies Act, 2013, disclosure under Section 184 of the Companies Act, 2013 in Form MBP-1, disclosure under Section 164 (2) of the Companies Act, 2013, details of membership/chairmanship in committees, annual declaration of independence, code of conduct, annual declaration relating to shareholding, disclosure of entering, if any, into futures contract in commodities, code of ethics, non-association with trading/clearing member, etc.

The Selection Committee for the Appointment of Managing Director of your Company has, after following the process of short listing candidates, interviewed the short listed candidates for appointment of the Managing Director and Chief Executive Officer. Thereafter, upon receipt of prior approval of SEBI, Mr. Mrugank Madhukar Paranjape (DIN: 02162026) was appointed as the Managing Director and Chief Executive Officer for a period of three years with effect from May 09, 2016. Details of Mr. Mrugank Madhukar Paranjape and the terms of his appointment including remuneration payable to him is given in the notice convening the ensuing AGM whereby the Company is seeking your approval for his appointment as a Director and as the Managing Director and Chief Executive Officer.

Mr. Parveen Kumar Singhal (DIN: 01237602), Joint Managing Director, who was steering the affairs of the Company during the vacancy in the position of the Managing Director since May 10, 2014 has been re-designated by the Board of Directors as ''President and Whole Time Director'' with effect from April 01, 2016.

The shareholders at their Thirteenth Annual General Meeting held on Tuesday, September 29, 2015 had appointed, subject to approval of SEBI, Ms. Padma Raghunathan (DIN: 07248423), Ms. Madhu Vadera Jayakumar (DIN: 00016921), Mr. Amit Goela (DIN: 01754804) and Mr. Hemang Raja (DIN: 00040769) as Shareholder Directors. Subsequently, upon receipt of approval of SEBI, Ms. Padma Raghunathan, Ms. Madhu Vadera Jayakumar and Mr. Amit Goela were appointed as Shareholder Directors with effect from February 04, 2016 and Mr. Hemang Raja with effect from June 30, 2016.

Your Directors are pleased to inform that your Company has three women Directors on its Board as against the stipulation of having at least one woman Director as mandated under the Companies Act, 2013.

Mr. Satyananda Mishra (DIN: 01807198) was appointed as an Independent Director on November 19, 2013 by FMC for a period up to March 31, 2016. SEBI has, in accordance with the provisions contained in SECC Regulations which provides for a term of 3 years for Public Interest Directors, extended the tenure of directorship of Mr. Satyananda Mishra, Public Interest Director, up to November 18, 2016, being the full term of 3 years.

Similarly, SEBI extended the term of directorship of Mr. Dinesh Kumar Mehrotra (DIN: 00142711), Public Interest Director, up to July 02, 2016 as against the term up to March 31, 2016 approved by FMC while appointing him on July 03, 2013 and the term of directorship of Mr. G. Anantharaman (DIN: 02229822), Public Interest Director, up to October 16, 2016, as against the term up to March 31, 2016 approved by FMC while appointing him on October 17, 2013. Mr. Dinesh Kumar Mehrotra has since retired at the end of his term on July 02, 2016.

Your Board of Directors acknowledges the contribution made by Mr. Dinesh Kumar Mehrotra at the deliberations of the Board, its committees, especially for his contribution in successfully steering the Company during the fallout of National Spot Exchange Limited and towards the business development of the Company.

Pursuant to receipt of approval of SEBI for appointment of Mr. Saurabh Chandra (DIN: 02726077) in place of Mr. Dinesh Kumar Mehrotra, the Board of Directors has inducted Mr. Saurabh Chandra as a Public Interest Director with effect from July 03, 2016.

Since Public Interest Directors are appointed for a fixed term by the regulator, they are not required to retire by rotation and they are not being reckoned in the computation of number of directors to retire by rotation at every AGM. Further, pursuant to the Procedural Norms, approval of shareholders is not be necessary for appointment of Public Interest Directors.

Ms. Pravin Tripathi (DIN: 06913463), Mr. Arun Kumar Nanda (DIN: 00010029), Mr. Subrata Kumar Mitra (DIN: 00029961) and Dr. Govinda Rao Marapalli (DIN: 01982343) continue as Public Interest Directors on the Board.

In accordance with the provisions of the Companies Act, 2013, Mr. M. A. K. Prabhu (DIN: 03195461) and Mr. Ajai Kumar (DIN: 02446976), who were appointed as Shareholder Directors with effect from October 14, 2014 and who have been longest in office since their appointment as such, shall be subject to retire by rotation at the ensuing AGM. Mr. M. A. K. Prabhu has indicated, consequent upon his retirement from the services of Canara Bank, that he does not intend to offer himself for re-appointment, whereas Mr. Ajai Kumar has expressed his willingness to seek re-appointment. Further, your Company has received a notice under Section 160 of the Act proposing candidature of Mr. Chengalath Jayaram (DIN 00012214) as a Shareholder Director of the Company.

KEY MANAGERIAL PERSONNEL

In accordance with the provisions of the Companies Act, 2013, as at April 01, 2015, Mr. Parveen Kumar Singhal, Joint Managing Director, Mr. Ajay Puri, Company Secretary and Mr. Sandeep Kumar Sarawgi, Chief Financial Officer were the Key Managerial Personnel (KMP) of the Company.

The designation of Mr. Parveen Kumar Singhal was changed to ''President and Whole Time Director'' with effect from April 01, 2016 and the following senior officials of the Company were identified to be the KMPs for a period of three years from the date mentioned against their names: Mr. Narendra Ahlawat, Senior Vice President - Market Operations from February 04, 2016, Mr. Rahi Racharla, Senior Vice President - Technology, from February 04, 2016, Mr. Krishnan Vishwanathan, Chief Regulatory Officer, from March 11, 2016. Effective from May 09, 2016, Mr. Mrugank Madhukar Paranjape, MD & CEO, is the KMP of the Company.

Mr. Sandeep Kumar Sarawgi, consequent to his resignation from the services of the Company has ceased to be an employee as well as a KMP with effect from August 08, 2016.

PERFORMANCE EVALUATION OF THE BOARD AND THE EVALUATION CRITERIA

In accordance with the provisions of the Companies Act, 2013 and the Listing Regulations, your Company has formulated criteria for performance evaluation of individual Directors, Board Committees and the Board as a whole. Further, Directors'' appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters are included in the Nomination and Remuneration Policy.

A statement indicating the manner in which formal annual evaluation of the Directors, the Board and Board Committees has been made is set out in Annexure XIII to this Report.

AUDIT COMMITTEE

The composition of Audit Committee is covered in the Corporate Governance Report. During the year under review, there were no instances, where the Board had not accepted any recommendation of the Audit Committee.

STATUTORY AUDITORS

M/s. Shah Gupta & Co., Chartered Accountants, Mumbai (Firm Registration No. 109574W with the Institute of Chartered Accountants of India), was appointed as statutory auditors by shareholders at their Thirteenth Annual General Meeting held on Tuesday, September 29, 2015 for a period of five years with effect from September 29, 2015, subject to ratification by the shareholders at every annual general meeting, at a remuneration, as recommended by the Audit Committee and approved by the Board of Directors of the Company.

Your Company has received from them the required certificate, pursuant to Section 139 (1) of the Companies Act, 2013 and the rules made thereunder, confirming their eligibility to be the auditors of the Company. The ratification of shareholders is being sought at the ensuing AGM for their continuing to be the statutory auditors as well as approval for their remuneration for their assignment for the year ending March 31, 2017.

AUDITORS'' REPORT

M/s. Shah Gupta & Co., Statutory Auditors appointed under Section 139 of the Companies Act, 2013 have audited the accounts of your Company for FY16, which forms part of the financial statements.

There is no qualification, reservation or adverse remark or disclaimer made by the Statutory Auditors in their reports. Hence the need for explanations or comments by the Board does not arise.

The Statutory Auditors have recorded a Matter of Emphasis, details of which are given below.

Auditors'' ''Emphasis of Matter''

"We draw attention to Note 34(a) to the Financial Statements regarding the Company carrying the investment in warrants of Metropolitan Stock Exchange of India Limited (MSEI) aggregating to Rs.415.92 million at face value of Rs.1/- per warrant (after making provision of Rs.425.89 million for diminution in value of warrants) on the basis of the interim order of the Hon''ble Bombay High Court restraining MSEI from acting in any manner directly or indirectly in cancelling and/ or extinguishing the warrants or any rights relating thereto and as per the order, MSEI has deposited Rs.200.00 million in the Court. The Hon''ble Bombay High Court has also asked MSEI to deposit balance Rs.215.92 million vide its order dated October 13, 2015. MSEI, however, has filed Notice of Motion seeking stay on the operation and implementation of the October 13, 2015 order. Pending outcome of the matter, the investment in warrants of MSEI aggregating to Rs.415.92 million is considered realisable by the management. Our opinion is not qualified in respect of this matter"

Management Response, as given in Note 34(a) to the standalone financial statements

The Company, along with Financial Technologies (India) Limited (FTIL), an erstwhile anchor investor/promoter of the Company, held equity shares and warrants in Metropolitan Stock Exchange of India Limited (MSEI), (formerly MCX-Stock Exchange). As per the applicable SEBI regulations, MSEI was required to adjust its shareholding pattern so as to bring it within the limits prescribed by the SEBI regulations within the time prescribed, i.e. June 19, 2015. Towards this end, the Company made serious efforts to dispose off the warrants. However, these efforts were significantly hampered by several factors that reduced the marketability of MSEI''s warrants, such as consistently reducing market share and net worth which reduced the value and demand for MSEI''s shares and warrants. This made it difficult to dispose off the warrants. Since these factors were outside the Company''s control, the Company approached SEBI seeking an extension of time to dispose off the warrants. Also, in view of the merger of the SEBI and the FMC, the Company also requested SEBI to consider treating the Company on par with recognized Stock Exchanges so that the Company could hold upto 15% shareholding/warrants in MSEI. SEBI, however, did not grant the Company''s request. Despite these factors, the Company continued to make vigorous efforts to dispose off the warrants. The Company''s efforts, however, were thwarted by MSEI, who announced a rights issue of equity shares on May 29, 2015 at par i.e. at Rs.1 per share. Since the rights issue remained open until July 9, 2015, it was virtually impossible to dispose off all the warrants before June 19, 2015. Apprehending that MSEI would cancel the warrants and misappropriate the deposit placed by the Company with MSEI against the warrants, the Company filed a Suit against MSEI before the Hon''ble Bombay High Court seeking an injunction against cancellation of the warrants and appropriation of the deposit. The Company also sought refund of the amount of Rs.415.92 million, being the amount of deposit presently held by MSEI against the warrants. Vide its interim orders dated July 9, 2015 and July 10, 2015, the Hon''ble High Court restrained MSEI from cancelling and/or extinguishing the warrants or any rights relating thereto, and from dealing in any manner with the remaining deposit of Rs.415.92 million till further orders. The Hon''ble Court also restrained MSEI from taking any steps in pursuance of any Board resolution that MSEI may have passed for cancellation of the warrants. By a further order dated August 3, 2015, the Hon''ble Court recorded MSEI''s statement that MSEI would deposit a sum of Rs.200.00 million in Court within a period of four weeks, on a without prejudice basis, to establish its bona fides. The matter was heard on October 8, 2015 and the order pronounced on October 13, 2015. The Hon''ble Court, inter alia, has held that although the Company may have been deprived of its rights to trade the warrants for shares or trade the warrants for consideration after June 19, 2015 this does not mean that the extinguishment of the warrants would entail appropriation of the deposit. The Hon''ble Court has also held that the money admittedly belongs to the Company and there is no provision in law or in contract whereby MSEI could appropriate the money towards its own capital reserves. In view of the above, the Hon''ble Court has concluded that it would not be desirable to allow MSEI to retain the deposit pending trial of the Suit. Accordingly, the Hon''ble Court has made the Company''s Notice of Motion absolute and directed MSEI to deposit an additional sum of Rs.21,59,17,672/- to the credit of the suit account, within a period of eight weeks from the date of the Order. Thus, the total amount deposited by MSEI would be equal to Rs.415.92 million. This amount is to be invested in a fixed deposit with a nationalized bank pending hearing of the Suit ("October 13 Order").

On December 9, 2015, MSEI filed Appeal No. (L) 927 of 2015 before a Division Bench of the Bombay High Court against the October 13 Order. MSEI also filed Notice of Motion (L) No.3471 of 2015 seeking a stay on the operation and implementation of the October 13 Order, pending final hearing and disposal of the Appeal, inter alia, on the grounds that (a) the Company was aware that it had to divest its excess shareholding in the form of Warrants by June 19, 2015;

(b) MSEI was required to ensure compliance of applicable laws and regulations, and thus only cancelled the warrants as otherwise it apprehended being derecognized by SEBI; (c) MSEI had established its bona fides by not acting on its Board Resolution dated June 27, 2015 and also by depositing a sum of Rs.200.00 million with the Bombay High Court; and (d) Given that the Company''s warrants have not been cancelled and MSEI has been restrained from implementing its Board Resolution dated June 27, 2015, MSEI cannot be additionally called upon to deposit a further Rs.215.92 million in Court. The matter was listed on 17.02.2016, for hearing on the Notice of Motion filed in the said appeal. On December 10, 2015, MSEI also filed Notice of Motion (L) 3486 of 2015 in the Suit before the Single Judge seeking a vacation of the October 13 Order on the ground that MSEI has now passed a resolution withdrawing their earlier resolution of cancellation.

Vide an interim order dated December 11, 2015, the Division Bench extended the time given to MSEI for deposit of the amount of Rs.215.92 million till the next date of hearing. As the matter is yet to be heard on merits, this interim order granting further time to MSEI to deposit the money has been extended from time to time. In March, 2016, the assignment of the Judges changed and the matter was listed before a different Bench. However, in view of the fact that the earlier Division Bench had already heard the matter and was aware of the facts, both parties made a representation to the Ld. Chief Justice of the Bombay High Court seeking assignment of the matter to the same Division Bench. The parties are still awaiting necessary directions from the Ld. Chief Justice for re-assignment of the matter.

In view of the above, the Company has valued the warrants at its face value of Rs.1 each and brought down the carrying cost by Rs.425.89 million. As the Company was only able to sell 148,277,938 warrants to various parties/entities at bids below its carrying cost, a loss of Rs.134.83 million was incurred on the sale of these warrants. Further, based on the market price determined on a weighted average basis for the sale of warrants by MCX, the equity shares have been brought to the lower of cost and this aforesaid market value. This is as per the Company''s Accounting Policy on current investments and accordingly a provision of Rs.33.30 million has been made. The aggregate loss, diminution and provision of Rs.594.02 million on account of the investments in MSEI are exceptional in nature and were accordingly disclosed in the financial results for the quarter ended June 30, 2015. Further provision of Rs.16.43 million has been made in quarter ended March 31, 2016 towards equity shares investments as per Company''s Accounting Policy. The aggregate loss, diminution and provision on account of the investments in MSEI for FY 2015-16 is Rs.610.45 million. As at March 31, 2016, the Company held 6,65,99,408 equity shares of MSEI (valued at Rs.57.25 million at the rate of Rs.0.86 per share) and 41,59,17,672 warrants of MSEI (valued at Rs.415.92 million) and 65,00,000 equity shares of Metropolitan Clearing Corporation of India Limited (MCCIL) (formerly known as MCX-SX Clearing Corporation Limited (valued at Rs.65.00 million).

SECRETARIAL AUDITOR AND SECRETARIAL AUDIT REPORT

The Board had appointed M/s. Rathi & Associates, Practicing Company Secretaries, Mumbai as Secretarial Auditors of your Company to conduct Secretarial Audit for FY16.

In accordance with Section 204(1) of the Companies Act, 2013, the Secretarial Audit Report for the financial year ended March 31, 2016 is annexed herewith and marked as Annexure XIV to this Report.

There is no qualification, reservation or adverse remark or disclaimer made by the Secretarial Auditors in their report and hence does not require any explanation or comment by the Board.

INTERNAL CONTROL AND THEIR ADEQUACY

The Board has put in place various internal controls to be followed by your Company to ensure that the internal control mechanisms are adequate and are effective. The Board has also put in place state-of-the-art technology and has automated most of the key areas of operations and processes, to minimise human intervention.

The design, implementation and maintenance of adequate internal financial controls are such that it operates effectively and ensures the accuracy and completeness of the accounting records, relevant to the preparation and presentation that gives a true and fair view of the state of affairs of the Company and are free from material misstatements, whether due to error of omission.

The operational processes are adequately documented with comprehensive and well defined Standard Operating Procedures which inter alia includes the financial controls in the form of maker and checker being with separate individuals.

The Board has approved a scheme of financial sub-delegation to officials of your Company for incurring expenses. The Board with a view to ensure transparency, has also formulated various policies and has put in place appropriate internal controls for the procurement of services, materials, fixed assets, monitoring income streams, investments and financial accounting.

Various other measures include adherence to systemic controls, information security controls as well as role-based/need- based access controls. Further, the existing systems and controls are periodically reviewed for change management in the situations of introduction of new processes/change in processes, change in the systems, change in personnel handling the activities, etc.

The Audit Committee of the Company, comprising Public Interest Directors, periodically reviews and recommends the unaudited quarterly financial statements as also the annual audited financial statements of your Company. Your Company has appointed a firm of chartered accountants to conduct independent financial and operational internal audit in accordance with the scope as defined by the Audit Committee. The reports from the Internal Auditors are reviewed by the Audit Committee on periodic basis and the Internal Auditors have been advised to issue flash reports, if required. Further, all related party transactions are placed before the Audit Committee and are approved/ratified by it after deliberations.

MATERIAL CHANGES AND COMMITMENT

Material changes and commitments affecting the financial position of your Company which have occurred after March 31, 2016 and up to the date of this Report are covered at different sections of this Report. An update of the following matter is being provided as given below -

A. Metropolitan Stock Exchange of India Limited (erstwhile MCX Stock Exchange of India Limited)

The Hon''ble Bombay High Court (the High Court), before which your Company had filed a Writ Petition against MSEI heard the parties and by its final order passed on October 13, 2015 directed MSEI to deposit the balance sum of Rs.21,59,17,672/- with the Prothonotary & Senior Master of the High Court by December 08, 2015.

However, MSEI submitted to the High Court that it has since reinstated the warrants of Rs.415.92 million earlier cancelled by it, for which your Company had filed the writ petition, and had petitioned for refund of Rs.200 million deposited by it. The High Court is yet to hear the matter.

Further to details contained in Note no. 34 (a) of the Notes to Accounts forming part of the standalone financial statements for the year ended March 31, 2106, your Directors have to inform that MSEI has meanwhile, without prejudice to its rights, contentions and remedies at large and pending disposal of dispute before the High Court, has proposed that since your Company under the new regulator is deemed as a recognised stock exchange, it can enhance its stake in MSEI by converting the appropriate number of warrants and the balance amount shall be refunded to the Company by cancelling the remaining number of warrants or in the alternative, the excess warrants held by your Company be converted into equity shares of Metropolitan Clearing Corporation of India Limited (MCCIL), a subsidiary of MSEI, which would result in increasing the shareholding of your Company in MCCIL as your Company would need to avail the services of a clearing and settlement company such as MCCIL instead of operationalizing its own clearing corporation (MCX CCL) to comply with the regulatory requirements.

The Company evaluated both the proposals submitted by MSEI and considering the long-term impact of prolonging the litigation and keeping the larger interest of its stakeholders, was of the view that a mutual settlement would be a better option given the circumstances of the case. Accordingly, based on mutual interaction between the Company and MSEI officials in consultation with the counsels of the respective companies, a tentative agreement for an out-of-court consent and settlement terms is being discussed and if agreed, your Company may enhance its stake in MSEI by conversion of appropriate number of warrants, subject to the requisite regulatory approvals and that your Company would get a refund for the balance MSEI warrants held by it, which would thereafter stand cancelled. The said proposal would be finalised in consultation with the counsels of the Company and MSEI before being submitted to the High Court for approval.

B. Metropolitan Clearing Corporation of India Limited

As at the beginning of FY16, your Company held 65,00,000 equity shares constituting 26.00% of the paid up capital in MCCIL. Consequent to the increase in the paid-up capital of MCCIL from Rs.250 million to Rs.450 million, by way of a Rights Issue, in which your Company had not participated, the holding of your Company in MCCIL got reduced from 26.00% to 14.44% with effect from July 02, 2015. Accordingly, MCCIL is no longer an associate of your Company effective that date, in terms of Accounting Standard 23 (AS-23). Subsequently, MCCIL has made yet another Rights Issue effective October 1, 2015 by which its paid-up capital was increased from Rs.450 million to Rs.700 million. As the Company did not participate in this Rights Issue, its shareholding decreased from 14.44% to 9.29%. Your Company is making efforts to further dilute its shareholding in MCCIL and fully divest its holding in MCCIL.

C. In the matter of criminal complaint lodged by Mr. Ketan Shah pursuant to PWC Report and writ filed by the Company in the Bombay High Court

Pursuant to the order dated April 21, 2015 passed by Ld. Additional Chief Metropolitan Magistrate of the 22nd Court, Andheri, in the matter of Mr. Ketan Shah in CC No. 25/SW/2015, MIDC Police Station has registered an First Information Report (FIR) on April 25, 2015 against the erstwhile management of your Company, Financial Technology (India) Limited and others under various sections of the Indian Penal Code, 1860. Upon the request made by your Company for re-opening of the 11 complaints earlier closed by MIDC Police Station, MIDC Police Station informed that the complaints filed by your Company pursuant to the PwC (Price Waterhouse Coopers) Report have also been tagged in the above mentioned FIR. The enquiry is under way and your Company is awaiting for response from MIDC Police Station in the matter. Meanwhile, your Company has filed a writ petition before the Hon''ble Bombay High Court against the State of Maharashtra and Others, seeking a direction, inter alia, to set aside the transfer of complaints by Economic Offences Wing (EoW), Mumbai Police to MIDC Police Station and further to direct EoW to carry out investigation into the complaints in a time bound manner and place a report on the investigation before the Court. The said complaints were initially filed before EoW by your Company which the EoW has transferred to MIDC Police Station.

Further, your Company was also in receipt of letters from Mr. Ketan Shah dated February 10, 2016, February 11, 2016, February 27, 2016 and July 01, 2016 requesting immediate actions to preserve the interests of the Company and its shareholders. Mr. Shah has further stated in his letters that a closure report (C Summary) has been filed by the Investigating Officer of Andheri MIDC Police Station in the said complaints.

Meanwhile, your Company has filed a criminal application in the aforesaid Writ Petition praying, inter alia, to pass an order and injunction, restraining MIDC Police Station from closing the investigation into the said complaints and to direct the Additional Commissioner of Police, Economic Offences Wing, Mumbai Police, to take over the investigation into the complaints.

Your Company has endeavoured to take all the possible legal measures in order to protect the interest of the Company and its stakeholders.

D. Mentha oil matters

The Deputy Commissioner of Commercial Tax, Division - 1, Chandausi, Uttar Pradesh, by his ex-parte orders dated October 29, 2010 directed your Company to pay a sum of Rs.288.73 million towards penalty for the alleged failure to deposit trade tax amount collected under the Uttar Pradesh Trade Tax Act, 1948 from the buyers of Mentha Oil traded on the Company''s trading platform during the years 2005-06, 2006-07 and 2007-08. Aggrieved by the said ex-parte orders and various subsequent orders/ex-parte orders/show cause notices your Company contested the same and finally again the Deputy Commissioner passed an ex-parte order on September 26, 2014 levying the same penalty for the aforementioned assessment years.

However, on January 22, 2015 the Deputy Commissioner vide his order has re-opened the matter. After hearing your Company and its reply, the Deputy Commissioner passed his orders dated July 20, 2015 (received by the Company on August 20, 2015) and modified the total penalty to Rs.144.36 million in the aforesaid matters. The Company successfully challenged the said orders before the First Appellate Authority and the said Appellate Authority vide its Order dated March 30, 2016 granted a stay in favour of your Company directing to deposit 50 (fifty) percent of the disputed amount of the penalty. Your Company further appealed against the First Appellate Authority orders before the Commercial Tax Tribunal and the said Tribunal vide its order dated April 29, 2016, inter alia, directed your Company to deposit 80 (eighty) percent of the disputed penalty amount. Your Company successfully argued the main appeals and the First Appellate Authority vide order dated June 01, 2016 has set aside the aforesaid orders of the Deputy Commissioner of Commercial Tax and remanded all three matters to Deputy Commissioner of Commercial Tax.

E. Status of compounding applications

During FY15, your Company had filed nine applications seeking compounding of offence of earlier years, under Section 621A of the Companies Act, 1956, against the Show Cause Notices received from the Registrar of Companies, Mumbai, Maharashtra. As on date of this Report, compounding has been effected in respect of seven applications by Regional Director, Western Region and Company Law Board, Mumbai Bench. The Compounding Authorities, have imposed an aggregate compounding fee of Rs.7,35,600/- on the Company, as stated herein below, and the amount has since been paid. The status of Compounding Applications as at March 31, 2016 is given in the Extract of the Annual Return in Annexure XI.

Sr. Compounding Authority Offence under the Companies Compounding fee no. Act, 1956 (Section No.) (Rs.)

1 Regional Director, Western Region 193 9,600

2 Regional Director, Western Region 301 26,000

3 Company Law Board, Mumbai Bench * 220 1,00,000

4 Company Law Board, Mumbai Bench * 224(8) 1,00,000

5 Company Law Board, Mumbai Bench * 297 2,00,000

6 Company Law Board, Mumbai Bench * 372A 1,00,000

7 Company Law Board, Mumbai Bench * 372(5) 2,00,000

* Copy of order is awaited

Further, on applications for compounding by the ex-Directors and the ex-Company Secretary of the Company consequent upon the Show Cause Notices issued to them by the Registrar of Companies, Mumbai, Maharashtra, the concerned authorities, i.e., the Regional Director, Western Region and the Company Law Board, Mumbai Bench have passed compounding orders towards the same.

F. Status of Special Audit

In continuation to the detailed analysis taken up by your Company pursuant to the Special Audit conducted of your Company during the previous financial year, appropriate actions were initiated including taking legal measures and filing of recovery suits as were deemed fit. Further, in respect of summons received during FY15 under Section 131 of the Income Tax Act, 1961 in relation to donation of Rs.10 million given by the Company to a Trust during the financial year 2013-14, the Company has submitted the details sought for and proceedings are still on.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY''S OPERATIONS IN FUTURE

Save as except disclosed in this Report, no significant and material orders were passed, during the year under review, by the regulators or courts or tribunals impacting the going concern status and Company''s operations in future.

HUMAN RESOURCE DEVELOPMENT

Your Company believes in strategic alignment of Human Resources to its business priorities and end objectives. As at March 31, 2016, your Company employed a dedicated team of 327 employees.

Your Company has in place an anti-sexual harassment policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. An internal Complaints Committee was formed in FY15 to redress complaints received regarding sexual harassment. No complaints were received during the year 2015- 16 in relation thereto.

Your Company continues to attract, retain and nurture talented people in its endeavour to be an employer of choice. It has, from time to time, been granting employees stock options (ESOP) representing equivalent number of equity shares of Rs.10/- each of the Company, to eligible employees under the Employees Stock Options Scheme - 2008 (ESOP 2008), adopted through the Trust route.

The disclosures pursuant to SEBI (Share Based Employee Benefits) Regulations, 2014, Section 62 of the Companies Act 2013 read with Companies (Share Capital and Debenture) Rules, 2014, as at March 31, 2016 in connection with the ESOP 2008 are set out in Annexure XV to this Report.

PARTICULARS OF REMUNERATION

Your Company has adopted a well-defined Nomination & Remuneration Policy for its Directors, KMPs and other employees, which forms part of this report as Annexure XVI.

The ratio of remuneration of each Director to the median employee''s remuneration and other details in accordance with Section 197 (12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are forming part of this report as Annexure XVII.

Further, in accordance with Section 197 (12) of the Companies Act, 2013 read with Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and as per requirement of SEC Regulations, a statement containing particulars of employees as stipulated therein also forms part of this Directors'' Report as Annexure XVIII. Pursuant to Section 136 of the Companies Act, 2013, the same is open for inspection at the registered office of your Company

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO

The disclosures to be made under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, are given as under:

A. CONSERVATION OF ENERGY

Your Company, though not being energy intensive, takes various measures to reduce its energy consumption by using energy-efficient computer systems and equipment. As an ongoing process, your Company evaluates new technologies and techniques to make its infrastructure more energy efficient.

(i) Steps taken or impact on conservation of energy

Your Company, for the Exchange servers, has installed in-row cooling system that cools equipment based on the heat generated, and ensures that no energy is wasted in running compressors excessively to maintain the desired temperature levels. Some of the policies implemented by your Company on an ongoing basis as a part of energy conservation/saving includes:

1. Maintaining adequate capacitor bank for non-linear electrical loads like air-conditioning plant, pumps and Heat Recovery System, thereby reducing the drawing of extra energy and improving power factor.

2. Preventive maintenance of air conditioning system on scheduled basis and ensuring that the heat sensors and electronic components are properly functioning for compressors to achieve variable compression linked to heat levels for reduction in power consumption.

(ii) Steps taken by your Company for utilising alternate sources of energy:

No alternate source of energy is utilized by your Company.

(iii) Capital investment on energy conservation equipment:

During the year under review, no capital expenditure is incurred in relation thereto.

B. TECHNOLOGY ABSORPTION:

(i) The efforts made towards technology absorption:

Technology is a key enabler and core facilitator for achievement of the major goals of your Company and is identified as one of the strategic pillars. Your Company hosts all mission-critical applications and the supporting infrastructure in its state-of-art Data Center which is supported by the best-of-breed network, security and other necessary infrastructure. Your Company''s technological infrastructure is built on the next generation technology mechanism, which can cater to all market participants by virtue of being fast, secure, cost effective, transparent and regulated. Your Company continues to make substantial investments in its technology platform and systems for meeting increasing market requirements and for keeping pace with the rapid technological developments and changes.

Your Company''s technology platform continues to be stable and robust and supports increasing transaction volumes. At present, the Exchange''s system has a handling capacity of 40,000,000 transactions (Orders and Trades put together) per day, which is well above the recorded volumes witnessed by the Exchange till date. Your Company has embarked on a program to equip its Exchange Technology Platform with more processing capacity and lower latency to meet the scale and transaction volume requirements in the coming years. Your Company provides various mode of connectivity solution to market participants including NPN-POP, VSAT, VPN, leased line, and internet and based on their specific needs of performance, redundancy and information security they opt for appropriate connectivity solution.

All departments within the Company use technology to deliver superior services to the internal customers and trading and clearing members of the Exchange. With a view to support operations of the Surveillance Department effectively, your Company has setup and augmented systems for real-time analytics and data warehouse.

(ii) The benefits derived like product improvement, cost reduction, product development or import substitution;

Your Company has implemented cutting edge technologies which are best in class IT systems and practices in order to ensure that its technology platform becomes a strategic business tool for building competitive advantage.

The Company''s robust technology infrastructure has continued to provide uninterrupted trading experience and ensures no single point of failure. Through use of carefully evaluated and implemented technology solutions, your Company has been able to offer quality services at optimal costs.

(iii) In case of imported technology (imported during the last three years reckoned from the beginning of the financial year)

Your Company has not directly imported any technology during the last three financial years.

(iv) Your Company has not incurred any expenditure on Research and Development during the year under review.

C. FOREIGN EXCHANGE EARNINGS/OUTGO DURING THE YEAR UNDER REVIEW

Your Company is engaged in the business of operating a commodity derivative exchange and endeavours to export its services as and when opportunities are available. The details of foreign exchange earnings and outgo forms part of the Significant Accounting Policies and Note no. 26 and Note no. 27 of Notes forming part of standalone and consolidated financial statements respectively.

DISCLOSURE UNDER LISTING REGULATIONS

Details of disclosures in terms of requirements under Schedule V of the Listing Regulations, as are applicable to the Company, are given in the Corporate Governance Report forming part of the Annual Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013 with respect to the Directors'' Responsibility Statement, your Directors state that:

a. in the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

b. the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2016 and of the profit of the Company for the year ended on that date;

c. the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. the Directors have prepared the annual accounts on a ''going concern'' basis;

e. the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f. the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

The above are to be read along with the section on Auditors'' Report, given earlier in this report.

ACKNOWLEDGMENTS

Your Directors place on record their sincere gratitude to the erstwhile Forward Markets Commission, the Securities and Exchange Board of India, Ministry of Finance, Department of Economic Affairs, Government of India, Reserve Bank of India, Foreign Investment Promotion Board, Ministry of Corporate Affairs, Department of Posts, Central Depository Services (India) Limited, National Securities Depository Limited, BSE Limited, the National Stock Exchange of India Limited, Karvy Computershare Private Limited, shareholders, financial institutions, banks, trading and clearing members of the Exchange and their clients, business associates and all other stakeholders for reposing their continued faith and support . Your Directors also place on record their appreciation for the contribution made by employees at all levels.



For and on behalf of Multi Commodity Exchange of India Limited



Satyananda Mishra

Chairman of the Board



Mumbai

August 10, 2016


Mar 31, 2014

Dear Shareholders,

The Board of Directors is pleased to present the Twelfth Annual Report on the business and operations of your Company along with the Audited Statement of Accounts and the Auditors'' Report for the financial year (FY) ended March 31, 2014. The highlights for the year under review are given below:

Financial Results

(in Rs. million, except for the per share data)

Standalone Consolidated

2013-14 2012-13 2013-14 2012-13

Total Income 4,399.36 6,446.95 4,403.19 6,451.90

Total Operating Expenditure 1,949.34 2,087.84 1,949.43 2,087.91

Profit before interest, depreciation, exceptional items and tax 2,450.02 4,359.11 2,453.76 4,363.99

Less: Depreciation 342.99 307.47 342.99 307.47

Less: Interest 10.60 0.31 10.60 0.31

Profit before tax 2,096.43 4,051.33 2,100.17 4,056.21

Provision for tax 568.86 1,064.94 568.86 1,064.94

Profit after tax 1,527.57 2,986.39 1,531.31 2,991.27

Add: Share of profits of associate - - 0.33 0.26

Less: Share of minority interest - - (0.01) (0.01)

Add: Balance of profit of earlier years 7,500.93 6,242.27 7,514.97 6,251.18

Balance available for appropriation 9,028.50 9,228.66 9,046.60 9,242.70

Less: APPROPRIATIONS

Final dividend (Proposed) 153.00 611.98 153.00 611.98

Interim dividend (Paid) 356.99 611.98 356.99 611.98

Tax on Dividend 86.67 203.29 86.67 203.29

Transfer to General Reserve 152.76 298.64 152.76 298.64

Transfer to Settlement Guarantee Fund (SGF) 1,036.39 1.84 1,036.39 1.84

Balance carried to Balance sheet 7,242.69 7,500.93 7,260.79 7,514.97

Earnings per share (Rs.) 30.14 59.00 30.22 59.10

(Basic & diluted) 30.12 58.76 30.20 58.86

FINANCIAL PERFORMANCE, BUSINESS OPERATIONS AND OVERVIEW

During the year under review, your Company—India''s leading commodity futures exchange—proved its mettle by retaining a market share of over 80 percent in terms of the value of commodities futures traded, despite a challenging environment. Some of these challenges included the imposition of Commodity Transaction Tax (CTT) at 0.01 percent of the transactional value, applicable on sellers of non-farm futures with efect from July 01, 2013; and the contagion efect of the crisis hit National Spot Exchange Limited (NSEL).

The total turnover of commodity futures traded on your Exchange stood at Rs. 86,114.49 billion in FY 2013-14, as against Rs. 148,810.57 billion in the previous fiscal. For the year ended March 31, 2014, your Company''s total income (standalone) stood at Rs. 4,399.36 million, as compared to Rs. 6,446.95 million during the last fiscal. The operating income during the period under consideration was Rs. 3,406.67 million, as against Rs. 5,239.62 million in FY 2012-13. Other income during FY 2013-14 was Rs. 992.69 million, as against Rs. 1,207.33 million in the previous fiscal .The net profit after tax for the year ended March 31, 2014 stood at Rs. 1,527.57 million as against Rs. 2,986.39 million in FY 2012-13. The net worth as on March 31, 2014 stood at Rs. 13,160.97 million.

Your Company, a fully electronic commodity futures exchange, enjoys a competitive edge due to its domain expertise, experienced leadership team, step ahead in innovation & product mix, multiple domestic and international alliances, robust business model and scalable technology platform framework, and extensive reach with more than 2000 members, operating through over 467,000 terminals including Computer to Computer Link (CTCL) across over 1900 cities and towns across India.

The number of contracts traded on your Exchange in FY 2013-14 stood at 214 million as compared with 375 million in FY 2012-13. While the average daily turnover stood at Rs. 278 billion in FY 2013-14, as compared with Rs. 487.9 billion in FY 2012-13, it is noteworthy that, on April 15, 2013 your Exchange recorded its highest daily turnover since inception of Rs. 1,199.41 billion.

MCX silver micro futures, MCX silver mini futures, MCX copper futures, MCX gold petal futures, MCX gold mini futures were among the top 20 metal futures & options contracts and MCX crude oil futures and MCX natural gas futures were among the top 20 energy futures & options contracts in the global ranking of commodity futures contracts in CY 2013. (Source: FIA Annual Volume Survey March 2014). During April 2014, your Company was advised to discontinue the contracts in Silver (30 Kgs), Silver (5 Kgs) and Silver Micro (1 Kg) due to regulatory reasons.

During the year under review, Forward Markets Commission (FMC), regulator of your Company, vide its order dated December 17, 2013 has inter alia, held that in the public interest, and in the interest of the commodity derivatives market, which is regulated under the Forward Contracts [Regulation] Act, 1952, Financial Technologies (India) Ltd (FTIL), is not a ''ft and proper person'' to continue to be a shareholder of 2 per cent or more of the paid-up equity capital of your Company as prescribed under the guidelines issued by the Government of India for capital structure of commodity exchanges post 5 years'' of operation.

Your Company is making all eforts to implement the aforesaid order of the Commission, as well as, to be fully compliant with the revised norms regarding Shareholding, Ownership, net worth, ft and proper criteria, etc. The details relating to the same are more particularly covered in the ''Compliance with the Equity Structure Guidelines'' section.

In accordance with the directions of FMC, a Special Audit of your Company was carried out by an external agency for the period between inception of the Company and September 30, 2013, and the Final Report thereof was received on April 21, 2014. The Company, on the basis of the report, has initiated actions and is carrying out an analysis of the observations made in the report and shall initiate such actions as may be deemed necessary after such an analysis.

Subsequent to the NSEL crisis, a majority of the Board has been reconstituted. Among the key changes efected was the then MD & CEO, Mr. Shreekant Javalgekar, ceased to be MD & CEO with efect from October 22, 2013. The other details of re-constitution in the Board of your Company are covered in the ''Directors'' section of this report.

An Oversight Committee of the Board was constituted, till a new incumbent is appointed as MD & CEO, to oversee operations of the Exchange and provide directions to the Management. The Oversight Committee, inter alia, had among other observations expressed reservations on the terms of the Agreements entered into by your Company with FTIL group, especially with respect to the undue infuence exerted by them, and the need to have a re-look at the said agreements. The remedial actions, wherever warranted on the fndings of the Oversight Committee has been initiated and shall be closed to the satisfaction of the Audit Committee. The Board constituted a Negotiation Committee to discuss and negotiate with FTIL Group all the technology related as well as other agreements entered into with them. The Company is in an advanced stage of negotiations.

The Securities and Exchange Board of India (SEBI) vide its Order dated March 19, 2014 has also held that FTIL is not a ''ft and proper person'', to acquire or hold any equity shares or any instrument that provides for entitlement of equity shares or rights over equity shares at any future date in a recognised Stock Exchange or Clearing Corporation, either directly or indirectly. Pursuant to the said SEBI Order dated March 19, 2014, your Company has been directed by SEBI to divest its holding in both MCX-SX and MCX-SX CCL.

As at 31 March 2014, your Company had investments in 27,165,000 equity shares and 634,170,000 warrants of MCX Stock Exchange Limited (MCX-SX) and investments in 6,500,000 equity shares of MCX-SX Clearing Corporation Limited (MCX-SX CCL). Your Company vide its letter dated April 4, 2014 had represented to SEBI that FTIL and your Company no longer act in concert and therefore your Company should not be required to divest its holding in MCX-SX and MCX-SX CCL. However, SEBI vide its letter dated June 24, 2014 has informed your Company that it does not fnd any ground or circumstance to show that the Company and FTIL are no longer acting in concert. In view of the same, the Company once again has made a representation to SEBI highlighting various developments that have taken place since October/ November 2013 and to reconsider its decision and not insist on MCX to divest its stake in MCX-SX. On the other hand, the Company has been scouting for buyers to sell its stake in MCX-SX and MCX-SX CCL but has not been able to do so given the dismal operational performance by MCX SX and MCX SX CCL as well as their depleting net worth.

However, in view of the aforesaid directive of SEBI, these investments have been reclassified from long term investments to current investments at their carrying values.

Your Company''s view of the estimated useful life of office equipments — that were depreciated in accordance with the rates as specified in Schedule XIV of the Companies Act, 1956 — represented useful life of approximately 21 years; however, the revised estimated useful life has worked out to be ranging from 12 to180 months. This change in the estimate has been prospectively given efect to in the financial statements for the year ended March 31, 2014. Accordingly, the revised unamortised value as at January 01, 2014 is being amortised over the revised remaining useful life, and this change increased the depreciation charge for the year by Rs. 45.91 million.

During the year, the Company received a letter from the Ministry of Corporate Afairs ("MCA") seeking explanation/ clarifcation under section 234(1) of Companies Act 1956 ("Companies Act") and regarding a notice for inspection under section 209A of the Companies Act. The Company has submitted the requested information to MCA. An inspection was thereafter conducted by Registrar of Companies (RoC) and Regional Director (RD), and after interim inspection, RoC issued show cause notices to the Company alleging contravention to certain provisions of the Companies Act. Your Company has replied to the said show cause notices and has fled and is in the process of fling requisite compounding applications under Section 621A of the Companies Act seeking compounding of ofence under the relevant Sections of the Companies Act for which the Notices have been received by the Company.

AMENDMENT TO MEMORANDUM OF ASSOCIATION (MOA) AND ARTICLES OF ASSOCIATION (AOA)

Your Company sought approval of its shareholders vide postal ballot Notice dated November 27, 2013 wherein the Members passed the resolution relating to deleting the clause of ''Non-retiring Directors'' in Article 30 of the Articles of Association of the Company with requisite majority, while the resolution relating to amendment to the MoA could not be passed with the requisite majority. The results of the said postal ballot were declared on January 24, 2014.

Subsequently, your Company by Postal Ballot notice dated May 09, 2014 sought approval of its shareholders for deleting the words ''securities'' and ''ready'' and incorporating the words ''including related eco-systems'' after the words ''all support services relating thereto'' in the main objects in clause III (A) (1) of the MoA; and inserting new articles viz. Article 26A, Article 26B and Article 26C, immediately after existing Article 26 in the AoA of the Company.

The said inserted Articles, inter alia, provide that, if a shareholder is declared not ''ft and proper'' and if he fails or neglects to divest his shares forthwith or within such time as may be prescribed by the Company, the said shareholder shall deemed to have irrevocably constituted, nominated and appointed the Board of Directors of the Company as his agents, who shall cause to transfer such shares immediately to an escrow account which would be opened and operated by the Board. It also provides that the Board shall act either by itself and/or through a registered intermediary, as an agent, to deal with and dispose of such shares in such manner as the Board may consider ft, and all the monies realised from such sale of shares held in escrow, shall be paid to the said shareholder, subject to the lien (if any) on such shares and after deducting the expenses incurred by the Company for disposing of the said shares.

The Members passed both the resolutions relating to alteration of MoA and AoA with requisite majority. The results of the aforesaid postal ballots were declared on June 18, 2014.

Your Company has received the approval of FMC and the same has been in efect from the date of publication in the Ofcial Gazette of India.

COMPLIANCE WITH THE EQUITY STRUCTURE GUIDELINES

Your Company has been in compliance with the applicable ''Guidelines on the Equity Structure of the Nationwide Multi Commodity Exchanges after 5 years of operation'' dated July 29, 2009, as amended from time to time issued by Department of Consumer Afairs, Ministry of Consumer Afairs, Food and Distribution, Government of India.

FMC on May 06, 2014 issued revised norms regarding shareholding, ownership, net worth, ft and proper criteria, etc., which, inter-alia, prescribes that in the event any person ceases to be a ''ft and proper person'' or is declared so by FMC, such person shall forthwith divest its shareholding and pending such divestment of shares, the voting rights of such person stands extinguished and any corporate benefit in lieu of such holding are to be kept in abeyance/withheld by Exchange.

In view of the FMC order dated December 17, 2013 and the revised norms dated May 06, 2014 regarding shareholding, etc. issued by FMC, your Company vide letter dated May 12, 2014 intimated FTIL that its voting rights stand extinguished and any corporate benefit in lieu of such holding shall be kept in abeyance/withheld. As mentioned earlier, to implement FMC''s order, your Company sought shareholders'' approval through postal ballot and passed the requisite resolution on June 18, 2014 for amending its AoA and to comply with the new Guidelines. On receipt of the approval as elaborated above the Company shall initiate such actions as may be required for ensuring due compliance.

FMC vide its letter dated May 8, 2014, inter alia, observed that your Company had not taken tangible and concrete measures to implement FMC''s order dated December 17, 2013, and fndings of the Special Audit and the Oversight Committee of the Board of Directors. The Commission decided that till such time these directives are implemented by your Company, no new contracts will be approved for trading and the contract launch calendar for 2015 will be kept in abeyance. However, the approved contracts as per the contract launch calendar for 2014 shall be available for trading. The ability of your Company to continue beyond calendar year 2014 is predicated on its compliance with the aforesaid FMC order dated December 17, 2013. Your Company is sparing no efort to comply with the order/directives of the Commission and is confdent of being fully compliant with the said FMC order shortly.

In another development, FTIL''s shareholding in MCX is expected, to come down to 5 per cent, with FTIL selling 6 per cent of its shareholding through stock exchange mechanism including bulk deals and entering into a Share Purchase Agreement with Kotak Mahindra Bank Limited on July 20, 2014 for selling 15 per cent of its stake in MCX. Your Company is regularly following up with FTIL to take efective steps to divest its entire shareholding in the Company.

INVESTOR (CLIENT) PROTECTION FUND (IPF)

Your Company has established an Investor (Client) Protection Fund Trust to protect and safeguard the interests of investors (clients), in respect of eligible/legitimate claims arising out of default by any Member of the Exchange and to impart investors (clients) education, awareness, research or such other programmes as may be seceded by FMC and/or your Company from time to time out of the interest earned on investments of the Fund. As on March 31, 2014, the IPF corpus stood at Rs. 430.42 million.

SETTLEMNT GUARANTEE FUND

In accordance with clarifcations/directives issued by FMC, the Exchange transferred the following to the Settlement Guarantee Fund (SGF) during the year:

a) A sum of Rs. 1,036.39 million (net of tax) from the surplus in profits for the years FY2007-08 to FY2012-13,

b) Settlement related penalties and fnes w.e.f. September 2013, amounting to Rs. 6.43 million (net of tax),

c) Base Minimum Capital of Rs. 624.55 million and

d) Income earned from earmarked SGF investments Rs. 31.59 million (net of tax).

Pursuant to the FMC circular dated August 23, 2013, your Company transferred Rs. 1,036.39 million to SGF from the Surplus in the Statement of profit and Loss, being the amount pertaining to earlier periods. During the nine-month period ended December 31, 2013 an amount of Rs. 171.47 million was charged to profits and transferred to the SGF. The aforesaid FMC circular was partially modifed on March 14, 2014, which interalia required a stress test to be performed to determine the adequacy of the balance in SGF at the end of the year. The balance in SGF at year end being adequate, your Company released Rs. 171.47 million in March 31, 2014.

TRANSFER TO RESERVES

Your Directors propose to transfer Rs. 152.76 million to the General Reserve and Rs. 1,036.39 million to SGF Reserve. An amount of Rs. 7,242.69 million is also proposed to be retained in the profit & Loss account.

DIVIDEND

After considering your Company''s profitability, your Directors declared and paid an interim dividend of Rs. 7 per equity share on a face value of Rs. 10 per share for FY 2013-14, which totalled to Rs. 356.99 million.

Your Directors have further recommended a final dividend of Rs. 3 per equity share on a face value of Rs. 10 per share, totalling to Rs. 153.00 million, subject to the approval of Shareholders at the ensuing Annual General Meeting. The total dividend, including interim and final (if approved), aggregate to Rs. 10 per share, amounting to Rs. 509.99 million for the financial year ended March 31, 2014.

The total appropriation on account of interim and final dividend (if approved) and corporate tax on dividend thereon would be Rs. 596.66 million. The dividend will be tax-free in the hands of shareholders.

SHARE CAPITAL

There was no change in the share capital of the Company during the year under review.

As on March 31, 2014, the paid up share capital of your Company stood at Rs. 509.99 million comprising 50,998,369 equity shares of Rs. 10 each fully paid.

DEPOSITS

Your Company had not invited any deposits from the public, and as such, no amount of principal or interest related thereto was outstanding on the date of the Balance Sheet as on March 31, 2014.

BUY BACK OF EQUITY SHARES

During the period under review, your Company did not announce any scheme for buying back equity shares from its Shareholders. Accordingly, the requirements as specified under Section 77A of the Companies Act, 1956 do not apply.

SUBSIDIARIES

The Consolidated financial statements presented by the Company include financial information of its subsidiaries, namely Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) and SME Exchange of India Limited (SME).

MCXCCL, a wholly-owned subsidiary of the Company, was set up for the purpose of having a separate clearing house to provide services such as clearing and settlement of trades and guaranteeing counterparty risk. As on date, MCXCCL has not commenced operations, pending the amendment of Forward Contracts Regulation Act, 1952; and its present paid-up capital is Rs. 60 million.

SME, subsidiary (51%) of the Company, promoted jointly with Financial Technologies (India) Limited (49%), till date has not commenced its operations. SME''s paid-up capital is Rs. 1 million. SME has not commenced operations and there being no possibility of commencing the same in the foreseeable future, your Directors have recommended voluntary winding up of SME.

In terms of the general circular no. 2/2011 dated February 8, 2011 issued by the Ministry of Corporate Afairs in respect of section 212 of the Companies Act, 1956, the Board has accorded its consent for not attaching the balance sheet of your Company''s subsidiaries with the accounts of your Company at its meeting held on August 18, 2014. Pursuant to the Circular, the gist of financial details of the subsidiaries is included elsewhere in the Annual Report. The Consolidated financial statements prepared in accordance with Accounting Standard 21-Consolidated Financial Statements issued by Institute of Chartered Accountants of India and the Listing Agreement as prescribed by SEBI forms a part of this Annual Report, and are refected in the consolidated accounts of the Company. Annual accounts of subsidiaries and the related information shall be made available to members of the Company and those of its subsidiaries on request. Annual accounts of the subsidiary companies would also be kept at the registered office of the Company for inspection by any shareholder.

CONSOLIDATED FINANCIAL STATEMENTS

The audited Consolidated Financial Statements, based on the financial statements received from subsidiaries and associates, as approved by their respective Board of Directors, have been prepared in accordance with the requirements of Accounting Standard - 21 (AS-21) - "Consolidated Financial Statements" and Accounting Standard - 23 (AS-23) - "Accounting for Investments in Associates," in Consolidated Financial Statements as notifed under the Companies (Accounting Standard) Rules, 2006. The details of which are more particularly covered in the Notes to Accounts.

OUTLOOK

MCX ofers trading in futures of commodity segments including bullion, ferrous and non-ferrous metals, energy and agriculture. However, the Commodity Transaction Tax (CTT), implemented on non-agricultural futures trade with efect from July 01, 2013, has had an adverse impact on volumes of the exchange. The CTT imposed at 0.01%, increased the average cost of transaction by almost 300 per cent, and acted as a major disincentive for carrying out transactions. By increasing the cost of "hedging" transactions and impairing the hedging efciency of the market participants, the CTT led to a decline in the average daily volume and consequently the transaction revenue and profitability of your Company.

Certain state governments have increased stamp duties on commodity transactions, which have resulted in challenges. The West Bengal (which contributed 23 per cent of MCX''s volume in FY2013-14) government notifed a stamp duty of Rs. 1000 per crore of transactions by clients. This amount is significant to the extent of being twice the CTT and is about five times the maximum transaction fee charged by the Exchange (Rs. 210 per crore is the maximum fees charged for non-agricultural commodities).

Again, on July 30, 2014, the Rajasthan (which contributed 6.3 per cent of MCX''s volume in FY2013-14) government notifed an increase in stamp duty across commodities. The hike in stamp duty on non-agricultural commodities (Rs. 100 per crore) made the cost for trading twice as compared to agricultural commodities (Rs. 50 per crore). The increase in trading costs due to taxes, duties and other levies is likely to impact the Exchange''s performance.

In order to mitigate the impact of the tax and cater to demands of a large number of stakeholders, your Company initiated a number of steps during the year. Transaction charges on agricultural products were slashed to 75 paise per lakh for a turnover up to Rs. 20 crore and 50 paise per lakh for turnover above this quantum. Transaction charges on non-agricultural products were also reduced. Your Company expanded the list of acceptable sources for "Good Delivery in Gold", approving serially numbered gold bars (for Gold kg contracts and Gold mini contracts) supplied by "MMTC- PAMP" along with the supplier''s quality certifcate as good delivery. In the case of silver, your Company approved serially numbered silver bars of Grade 999 and Fineness 999 supplied by "MMTC-PAMP" along with the supplier''s quality certifcate as good delivery from October 09, 2013. Moreover, in its eforts focused on developing the silver futures market, MCX continued to exempt vaulting/storage charges for silver 1 kg bar stored in designated vaults at Exchange-specified delivery centres till March 31, 2014. Continuing its eforts to support trader''s participation on the MCX platform, your Company extended the spread benefit to diferent variants of copper (copper, copper mini) futures contracts. Similarly, MCX discontinued the annual charges of Rs. 20,000 per Algorithmic Trading Facility (ATF) per user ID with efect from April 01, 2013.

There has lately been a significant improvement in gold delivery, which reached a low in the month of February 2014 Gold 1Kg contract. The Exchange witnessed its highest delivery of 1100 kg in the MCX Gold 1Kg August 2014 contract, over the last one year. The significant increase in gold delivery in the benchmark contract is a clear indication of reinstatement of faith in the Exchange. The last time gold delivery in the contract crossed the 1000 kg-mark was in April 2013, much prior to the imposition of Commodity Transaction Tax and other events that led to turmoil in the commodity markets.

With a new government that has a clear mandate in place, it is being hoped that the long-pending Bill to amend the Forward Contracts (Regulation) Act, 1952 or FCRA will soon be placed and approved by the parliament. The earlier version of FCRA Amendment Bill, which was cleared by the relevant Department-Related Parliamentary Standing Committee, had noted, inter alia, that FMC should be made autonomous, and indices, intangible products and options should be allowed in India''s commodity derivatives market. The Committee also recommended that banks, insurance companies and mutual funds, etc. should be allowed to participate on commodity derivative exchanges. We hope these provisions are retained in the revised bill. Your Company has been making representations on the importance of this policy change and the urgency associated with it, and has been urging an early passage of the Bill in the parliament, at various forums.

While the notifcation on the Companies (Corporate Social Responsibility Policy) Rules, 2014, was issued by the Ministry of Corporate Afairs, on February 27, 2014, and came in to force on April 01, 2014, your Company has been focused on creating social value through its CSR activities. Your Company intends to achieve its CSR objectives by integrating its business processes with social processes, and developing innovative business models which create shared value.

To improve disclosure and instill confdence in market participants, the regulator and other stakeholders, since August 2013, your Company has started publishing quarterly statements detailing components of the Settlement Guarantee Fund (SGF) as per FMC Guidelines.

During the year, FMC took several regulatory initiatives to ensure integrity in the Indian commodity futures market while promoting its inclusive growth. While re-permitting algorithmic trading in gold mini contracts with efect from July 25, 2013, FMC empowered exchanges to allow algorithmic trading in other mini contracts based on criterion set by the regulator. It also issued revised guidelines for regulating algorithmic trading in the commodities futures market.

During the year, FMC also undertook various initiatives to improve market transparency and accessibility and to protect the interests of the clients. Some such initiatives are listed below:

For strengthening of warehousing facility, exchange-accredited warehouses were directed to compulsorily register with Warehousing Development and Regulatory Authority (WDRA);

Exchange members were asked to continue to refrain from ofering portfolio management services (PMS);

Exchanges were asked to keep trading platforms closed on Saturdays for all futures contracts;

The Risk Management Group of FMC was reconstituted and an Advisory Committee was constituted to look into issues arising out of technology-enabled trading facilities by exchanges;

Exchanges were issued directives on their contribution to the Settlement Guarantee Funds;

For reducing the cost of hedging, the market participants were exempted from paying margins (except mark-to- market) if they deposited certified goods to the exchange accredited warehouses;

Evening trade was permitted in ten internationally linked agricultural commodities;

Exchanges were issued directions on dealings in cash transactions and levying of diferential transaction charges;

A working group on common clearing for commodity exchanges was set up;

Fresh guidelines were issued on constitution of the board of directors and role of independent directors and appointment of chief executives at the nationwide multi-commodity exchanges;

Exchanges were directed to implement FSLRC''s recommendations on consumer protection;

Details of common /uniform client registration form/ process was spelt out;

Exchanges were issued instructions on disclosure of Investor (Client) Protection Fund Trust (IPFT) in the their financial statements;

Registration of each and every client for SMS and e-mail alerts was made mandatory;

Members were required to settle client accounts at least on a quarterly basis;

New guidelines were issued to enable commodity exchanges and their members use the Central KYC Registry.

During the year, your Company had knowledge-sharing opportunities with two foreign entities. On November 20, 2013,

MCX signed a Memorandum of Understanding with the China-based Dalian Commodity Exchange to facilitate potential collaboration in knowledge-sharing and research between the two large Asian exchanges. On March 31, 2014, a high level government delegation from Mongolia—the central Asian mineral-rich country—visited MCX to understand the various operational and self-regulatory aspects linked to operating a commodity exchange in their country.

COMMITMENT TO QUALITY

With a quest to achieve excellence in products and services ofered, your Company continues to monitor and maintain its efective and well-crafted Quality Management Framework. This Quality Framework is aligned to the business objectives of the Exchange, and ensures that your Company is focused on maintaining Customer and quality centric approach. Your Company is focused on continually improving its existing robust processes and quality services. Over the years, your Company has evolved mature processes, which assist in commendably reducing unpredictability across various business operations. Your company successfully cleared the iso 9001:2008 Surveillance Audit, after rigorous process audits across all its key operations. This showcases the Company''s dedication and commitment towards sustaining a robust Quality Management System.

In line with your Company''s commitment of ensuring Information Security and providing assurance to its stakeholders, your Company has a proactive Information Risk Management approach, and carries out risk assessment activities on a periodic basis. This year too, your company underwent stringent information security related audits, for its Information Security Management System, and retained its iso/ieC 27001:2005 certifcate.

ENVIRONMENTAL RESPONSIBILITY

Given the nature of its operations, MCX has a very low impact on the environment. However, MCX is committed to minimising its environmental impacts through efcient use of natural resources, including electricity, which is the key touch point of the Exchange''s technology-driven business. Your Company has an efective Environmental Policy and is governed by it. Your Company believes that to meet the objectives of the Environmental Policy, employee commitment is imperative. Thus, the Company through its CSR team creates awareness among employees and encourages them to adopt conservation practices. Your Company cleared the iso 14001:2004 re-certification audit, and continues to monitor its Environment Management Plan, which is developed on the basis of the Environment Review conducted annually to assess the impact of the Company''s activities. Your Company has also developed an e-waste policy for the safe disposal of e-waste from its premises. Its tie-up with authorised e-waste recyclers such as Eco Recycling Limited helps it dispose its e-waste in an eco-friendly manner. The e-waste disposal is in turn minimised through best practices in maintenance and re-use.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The details on the Corporate Social Responsibility (CSR) have been covered elsewhere in this Annual Report.

CORPORATE GOVERNANCE

Your Company continues to be committed to good corporate governance aligned with the best corporate practices. The report on Corporate Governance-stipulated by Clause 49 of the Listing Agreement-and certifcate from a Practicing Company Secretary regarding compliance with Corporate Governance norms, forms a part of this Annual Report.

MANAGEMENT''S DISCUSSION AND ANALYSIS STATEMENT

Management''s Discussion and Analysis Statement, as stipulated under the Listing Agreement, forms a part of this Annual Report.

DIRECTORS

Your Company being a commodity futures exchange is, inter alia, regulated by FMC. FMC has issued guidelines on the Constitution of the Board of Directors, Nomination and Role of Independent Directors and appointment of Chief Executives at the Nationwide Multi Commodity Exchanges, which were revised on May 17, 2013, August 12, 2013, September 13, 2013 and June 11, 2014. As mandated in the said guidelines, the appointment of all the directors on the Board of your Company is with the approval of FMC.

Pursuant to Section 149 (6) of the Companies Act, 2013 and the Listing Agreement, the Company has received independent directors'' declarations confirming that the respective independent director meets the criteria of independence. Further the Company has also obtained afirmation of adherence to Schedule IV of the Companies Act, 2013 and the Code of Conduct of the Company in accordance with the Listing Agreement from all the Directors as applicable.

Mrs. Usha Suresh, Independent Director, ceased to be a Director of the Company w.e.f. April 1, 2013. Mr. Dinesh Kumar Mehrotra was nominated by FMC as an Independent Director w.e.f. 03rd July, 2013 for a period upto March 31, 2016.

Mr. P. R. Barpande, Director appointed in casual vacancy, ceased to be a director w.e.f. August 30, 2013. Consequent to the directions of FMC vide letter dated August 29, 2013, Mr. Venkat Chary, Mr. C. M. Maniar and Mr. Shvetal Vakil, Independent Directors, ceased to be directors of the Company w.e.f. September 01, 2013. Mr. Lambertus Rutten, Non- Executive Director ceased to be a Director w.e.f. September 01, 2013. Mr. Prakash Apte, Independent Director, ceased to be a director with the concurrence of FMC w.e.f. September 01, 2013.

FMC vide letter dated August 28, 2013 appointed Mr. Santosh Kumar Mohanty, Director in FMC, as an Independent Director to represent the Central Government who shall hold office till August 31, 2014.

Mr. Joseph Massey ceased to be a director w.e.f. the conclusion of the AGM held on September 30, 2013.

Further, pursuant to the revision in FMC''s guidelines dated August 12, 2013, read with FMC''s letter dated September 13, 2013, mandating the appointment of shareholder directors with the approval of FMC, the following directors were appointed (including withdrawal/change thereof):

1. Mr. P. Paramasivam was appointed as a Shareholder Director to represent Corporation Bank w.e.f. October 22, 2013.

2. Mr. K. N. Reghunathan was appointed as a Shareholder Director to represent Union Bank of India w.e.f. October 22, 2013.

3. Mr. Rajiv S. Abhayankar was appointed on January 2, 2014 in place of Mr. Sanjaya Agarwal who was appointed on October 25, 2013, as Shareholder Director to represent Bank of Baroda.

4. Mr. M.A.K. Prabhu was appointed as a Shareholder Director to represent Canara Bank w.e.f. November 9, 2013.

5. Mr. B.V. Chaubal was appointed as a Shareholder Director to represent the shareholding of State Bank of India Group w.e.f. November 9, 2013.

6. FMC conveyed approval for continuation of Mr. P. Satish as a Shareholder Director to represent NABARD.

Mr. Shreekant Javalgekar ceased to be a Director and MD & CEO w.e.f. October 22, 2013.

The term of the Independent Director, Mr. G. Anantharaman, appointed on October 17, 2013, initially upto June 20, 2014, was extended by FMC till March 31, 2016. Mr. Pravir Vohra Independent Director appointed on October 17, 2013 for a term upto March 31, 2016, ceased to be a director w.e.f. June 26, 2014.

Mr. Jignesh Shah resigned w.e.f. October 31, 2013 as the Non-Executive Vice Chairman of the Company. Also, with the approval of shareholders through Postal Ballot and FMC, the clause pertaining to the permanent directorship (Non- Retiring Director) of Mr. Jignesh Shah in the Articles of Association of the Company has been deleted.

Mr. Satyananda Mishra has been appointed as an Independent Director with the approval of FMC on November 19, 2013 for a period upto March 31, 2016. FMC further approved the appointment of Mr. Mishra as the Chairman of the Board with efect from 27th November, 2013..

Mr. R. M. Premkumar, Independent Director and the then Chairman of the Board resigned w.e.f. December 12, 2013.

Consequent to the resignation of Mr. Paras Ajmera w.e.f. November 12, 2013 as Shareholder Director representing Financial Technologies (India) Limited (FTIL), Mr. Miten Mehta was appointed as a nominee of FTIL vide its letter dated November 26, 2013, and in accordance with FMC letter dated December 06, 2013. However, FMC vide its letter dated December 26, 2013 held that in view of its order dated December 17, 2013 wherein FTIL was held as not ''ft and proper person'', FTIL was not eligible for representation on the Board of the Company, and accordingly withdrew its approval granted earlier vide letter dated December 06, 2013.

Mr. S. N. Ananthasubramanian was nominated as an Independent Director by FMC w.e.f December 19, 2013 for a period upto March 31, 2016. However, he tendered his resignation letter dated 28th July, 2014 and FMC has accepted his resignation vide its letter dated August 01, 2014.

Pursuant to the process for appointment of MD prescribed by FMC, the Selection Committee recommended and the Board approved the appointment of Dr. Manoj Vaish for the post of MD & CEO, and was appointed as an additional Director w.e.f. January 02, 2014. Consequent to FMC''s approval he was appointed as MD & CEO for a period of three years w.e.f. February 01, 2014, subject to approval of shareholders. Dr. Vaish''s appointment and remuneration and variation thereof is being placed for approval of shareholders in the ensuing Annual General Meeting. However, Dr. Vaish resigned as the MD & CEO vide letter dated April 30, 2014. His resignation was accepted by the Board at its meeting held on May 09, 2014, and May 10, 2014, was his last day in office as the MD & CEO.

On resignation of Dr. Vaish, the Board again constituted an Oversight Committee consisting of Independent Directors to oversee the operations of your Company.

Further, pursuant to the Guidelines prescribed by FMC and in compliance thereof, Mr. Parveen Kumar Singhal, Executive Vice President of the Company, being the senior most executive of the Exchange, was appointed as the person responsible to take care of the day-to-day afairs of the Exchange under the direction and control of the Oversight Committee, until a new incumbent is appointed as the Managing Director/Chief Executive of the Company. The Company is in the process of appointing a new incumbent as the Managing Director /Chief Executive officer in accordance with FMC guidelines for Constitution of the Board dated June 11, 2014 and the provisions of the Companies Act, 2013. Ad interim, the resignation of the MD & CEO, and resumption of duty by Mr. Singhal, who was on leave, the Board constituted a Management Committee comprising of certain senior employees to look after the day-to-day afairs of the Exchange. The said Committee was disbanded efective May 23, 2014 on Mr. Parveen Kumar Singhal resuming his duties.

Consequent to Bank of Baroda (BoB) and Corporation Bank divesting their entire stake in the Company and the withdrawal and relinquishment of its right to nominate a representative on the Board of the Company, Mr. Rajiv Abhyankar, Shareholder Director representing BoB and Mr. P. Paramasivam, Shareholder Director representing Corporation Bank ceased to be Directors w.e.f. June 26, 2014 and August 11, 2014 respectively.

The Company received intimation from NABARD on July 04, 2014 towards withdrawal of nomination of Mr. P. Satish, and on NABARD''s recommendation, the Board has co-opted Mr. R. Amalorpavanathan as an Additional Director on August 18, 2014 to represent interest of NABARD subject to approval of the shareholders and FMC.

Ms. Pravin Tripathi was nominated as an Independent Director by FMC w.e.f. August 12, 2014 for a period up to March 31, 2017.

Pursuant to Section 10 (3) of the Forward Contracts (Regulation) Act, 1952, Guidelines for Constitution of the Board dated June 11, 2014 issued by FMC, Section 149(4) and other applicable provisions of the Companies Act, 2013 read with the clarifcation issued by FMC vide its letter dated August 11, 2014, Mr. Dinesh Kumar Mehrotra, Mr. Santosh Kumar Mohanty, Mr. Ravi Kamal Bhargava and Ms. Pravin Tripathi, being Independent Directors nominated by FMC are not being proposed for approval of shareholders in the ensuing AGM.

Pursuant to Section 160 of the Companies Act, 2013, notices have been received from Mr. Satynanada Mishra and Mr. G. Anantharaman, Independent Directors of the Company signifying their respective candidature for appointment, subject to such term as may be approved by FMC, as Independent Director on the Board of the Company along with the requisite deposit.

Notice has also been received from Canara Bank, shareholder of the Company signifying candidature of Mr. M. A. K. Prabhu to be appointed as Shareholder Director on the Board of the Company to represent its interest along with the requisite deposit under Section 160 of the Companies Act, 2013 and subject to approval of FMC.

The Board, at its meeting held on August 18, 2014, considered and recommended the appointment of Mr. P. K. Singhal as Joint Managing Director (JMD) of the Company for a period of three years on such remuneration as stated in the notice of the ensuing AGM of the Company, subject to approval of shareholders, FMC and other statutory approvals as may be required.

Accordingly, pursuant to Section 152 of the Companies Act, 2013, the appointment of the aforesaid Directors are being proposed for approval of shareholders to hold office as per the tenure mentioned in the Notice of the ensuing AGM of the Company.

During FY 2013-14, 13 Board meetings were held, details of which are available in the Corporate Governance report annexed to this Report.

AUDITORS

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, Mumbai (Regn. No. 117366W), submitted their resignation as Statutory Auditors of the Company in June 2014. To fll the casual vacancy, the Board at its meeting held on June 26, 2014 approved the appointment of M/s. Shah Gupta & Co., Chartered Accountants (Firm Regn. No.109574W) as Statutory Auditors, subject to the approval of shareholders at the ensuing Annual General Meeting. M/s. Shah Gupta & Co. has confirmed their eligibility and willingness to act as Statutory Auditors, if appointed, and the necessary certifcate pursuant to Section 139(1) of the Companies Act, 2013 and rules made thereunder has been received from them. Pursuant to Section 139(8) of the Companies Act, 2013, M/s. Shah Gupta & Co. shall hold office till the conclusion of the next annual general meeting to be held in 2015.

In terms of the provisions of the Companies Act, 2013, (Act) any appointment of the Statutory Auditors in the casual vacancy arising as a result of resignation of an auditor, has to be approved by the Company at a general meeting within 3 months from the date of recommendation of the Board of Directors of the Company and the said office shall be held till the conclusion of the next Annual General Meeting. Considering the coinciding of the General Meeting and the Annual General Meeting, the Board of Directors proposes/recommends the appointment of M/s. Shah Gupta & Co., Chartered Accountants, as the Statutory Auditors of the Company to hold office from the conclusion of this Meeting until the conclusion of next Annual General Meeting to be held in calendar year 2015, subject to the approval of the members

Further, in order to comply with FMC directive that none of the past audit firms be considered for re-appointment, the Company appointed M/s M. P. Chitale & Co., Chartered Accountants as the Internal Auditors for the Financial Year 2014-15.

AUDITORS'' REPORT

M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, Mumbai(Regn. No. 117366W), have audited the accounts of your Company for FY 2013-14. The Auditors in their Report to the Members expressed qualified opinions on the financial statements. These opinions and the Management response to the same are as given below:

1. As stated in Note 35 to the financial statements, in accordance with the directions of the Forward Markets Commission (FMC), a special audit of the Company was carried out by an external agency for the period since inception of the Company to 30th September, 2013. Pending the completion of the detailed analysis of the Special Audit Report by the Management of the Company, ongoing internal enquiry and agreements/conclusions by the Negotiations Committee, the financial implications, if any, in this regard cannot at present be ascertained and, accordingly, no adjustments have been made by the Management of the Company in the financial statements.

In view of the above pending analysis and ongoing enquiries, the outcome of which is not known and is uncertain at this stage, we are not in a position to comment on the consequential impact, if any, on the financial statements.

Management response:

In accordance with the directions of the Forward Markets Commission (FMC), a Special Audit of the Company was carried out for the period since inception of the Company to 30 September, 2013. The terms of reference, inter alia, included identifcation of related parties (as Defined by FMC in the terms of reference and a working defnition arrived at for the purpose of the review), review of non-trading transactions between the Company and significant related parties, and review of transactions of expenses incurred (individually) above Rs. 25 Lakhs. As per the Report, the working defnition of related parties is not as may be Defined under any provisions of any prevailing laws or guidance from any professional bodies in India.

The Final Report of the Special Audit was received on 21 April 2014 and was placed before the Board of the Company on 26 April 2014. The Management of the Company is making a detailed analysis of the observations in the Report, and after ascertaining the facts in each case is in the process of taking legal and other action, as appropriate. The Board of Directors has constituted a Negotiation Committee to discuss the contracts with entities related to the erstwhile promoter group, in particular, Financial Technologies (India) Limited. Pending the completion of the detailed analysis of the Report, ongoing internal enquiry and agreements/conclusions by the Negotiation Committee, the financial implications, if any, for earlier years in this regard cannot at present be ascertained and, accordingly, no adjustments have been made in the financial statements.

The Company has currently identified amounts aggregating Rs. 119.70 million incurred during FY 2013-14 where corresponding services may not have been received. Accordingly, such expenses have been reversed and a provision for doubtful recoverable has been made in the books for an equivalent amount. While this does not have any impact on the net profit before tax for the year, the corresponding efect on provision for tax has been accounted for, resulting in a lower profit after tax for the year by Rs. 39.90 million.

2. As stated in Note 37 to the financial statements, in view of the directives from the Securities and Exchange Board of India, long term investments in warrants of MCX Stock Exchange Limited and equity shares of MCX-SX Clearing Corporation Limited, have been reclassified from non-current investments to current investments. The Management of the Company is of the view that the aggregate carrying amount of current investments in these companies of Rs. 1,375.71 million, which is equivalent to the cost of their acquisition, represents the fair value of these investments as on the balance sheet date.

In the absence of sufcient appropriate audit evidence to determine a fair valuation of the aforesaid investments at balance sheet date, we have not been able to validate whether the carrying amounts of these investments is the lower of cost and fair value as required by Accounting Standard 13 on Accounting for Investments.

Management response:

As at 31 March 2014, the Company has investments in 27,165,000 equity shares and 634,170,000 warrants of MCX Stock Exchange Limited (MCX-SX) and investments in 6,500,000 equity shares of MCX-SX Clearing Corporation Limited (MCX-SX CCL). Pursuant to the SEBI Order dated 19 March, 2014, the Company has been directed by SEBI to divest its holding in both MCX-SX and MCX-SX CCL. The Company vide its letter dated April 4, 2014 has represented to SEBI that FTIL and the Company no longer act in concert and therefore the Company should not be required to divest its holding in MCX-SX and MCX-SX CCL. However, in view of the aforesaid directive of SEBI, these investments have been reclassified from long term investments to current investments at their carrying values. In accordance with Accounting Standard 13 on Investments and the Company''s accounting policy, current investments are to be carried at the lower of cost and fair value in the balance sheet. Based on the latest available audited financial statements of these companies, the Management of the Company is of the view that the aggregate carrying value of Rs. 1,375.71million, which is equivalent to the cost of their acquisition represents the fair value of these investments as on the balance sheet date.

Besides the above Qualifications, the Auditors in their Report as an "Emphasis of Matter" have drawn attention to Note 36(iv) of the financial statements regarding the ability of the Company to continue as a going concern beyond calendar year 2014, which is predicated on Company''s compliance with the FMC Order dated 17 December, 2013 with respect to divestment of the shares held by Financial Technologies (India) Limited and the fndings of the Special Audit and Oversight Committee of the Board of Directors.

Management response:

The FMC vide its letter dated May 8, 2014 observed inter alia, that the Exchange (i.e. the Company) had not taken tangible and concrete measures to implement the directives of the FMC regarding their December 17, 2013 Order with respect to divestment of shareholding by FTIL in the Company and the fndings of the Special Audit and Oversight Committee of the Board of Directors. The Commission decided that till such time the directives are implemented, no new contracts will be approved for trading as well as the contract launch calendar for 2015 will be kept in abeyance. However, the approved contracts as per the contract launch calendar for 2014 shall be available for trading.

The ability of the Company to continue as a going concern beyond calendar year 2014 is therefore predicated on its compliance with the aforesaid FMC Order dated 17 December, 2013. The Company is taking steps for implementing the FMC directives and is confdent of being fully compliant before the end of the calendar year.

Further, M/s. Shah Gupta & Co., Chartered Accountants have also subjected the Limited Review Report for the quarter ended June 30, 2014 similarly.

PARTICULARS UNDER SECTION 9(2) OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 READ WITH RULE 12 OF THE FORWARD CONTRACTS (REGULATION) RULES, 1954

In terms of the provisions of Section 9(2) of the Forward Contracts (Regulation) Act, 1952 read with Rule 12 of the Forward Contracts (Regulation) Rules, 1954, Commodity Exchanges are required to include certain particulars in their Annual Reports. These particulars for your Company are presented as Annexure I to Annexure VIII to the Directors'' Report.

HUMAN RESOURCE DEVELOPMENT

Your Company believes that an organisation''s most invaluable resource is its employees. As at March 31, 2014, your Company employed 277 permanent employees (excluding trainees, consultants and contract staf).

The Company''s focus has been on developing the core competencies of employees, and establishing a strong bond among them by providing a stimulating environment that enables sharing of knowledge, information, experience and resources, across all levels. Your Company believes that employee motivation and engagement are the key aspects of Human Resource Management. Every year, your Company assesses performance of employees based on well-Defined Key Result Areas (KRAs) to ascertain that employees are gainfully engaged and focused on Company''s core objectives. Their training and development needs are identified to further hone their understanding and skills.

The Company endorses a work environment which is fair, equitable and comfortable for its workforce. Your Company provides safe, secured and healthy work environment to all employees by conducting fre and safety drills, and ensuring the right level of indoor noise and air quality. In cognisance of the fact that employee satisfaction drives commitment, and commitment drives business performance, your Company has tried to create a cordial workplace atmosphere. Your Company continues to attract, retain and nurture talented people in its endeavour to be an employer of choice. Your Company also believes in treating employees with dignity and has put in place an Anti-Sexual Harassment policy.

During the year under review, the Compensation Committee of the Board at their meetings held on April 19, 2013 and February 19, 2014 considered and approved the grant of 25,300 and 10,000 stock options representing equivalent number of equity shares of Rs. 10/- each of the Company, respectively, to eligible employees under the Employees Stock Options Scheme-2008, adopted through the Trust route.

The details of the options granted and outstanding up to March 31, 2014 as required by clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure IX to this Report.

PARTICULARS OF EMPLOYEES

The particulars of the employees as required by the provisions of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, forms a part of the Directors'' Report as Annexure X.

CONSERVATION OF ENERGY, TECNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/OUTGO

a) Conservation of energy, Technology absorption

As your Company does not fall under any of the industries listed out in the Schedule appended to the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, particulars required to be disclosed with respect to conservation of energy and technology absorption, are not applicable to the Company.

Although the operations of your Company are not energy intensive, your Company takes various measures to reduce energy consumption by using energy-efcient computer systems and procuring energy efcient equipment.

Your Company believes that energy is a prime resource and as an ongoing practice, it ensures adequate distribution of load on all phases, and has installed harmonic flters to maintain the power factor close to 0.99 to 1.

For the Exchange servers, your Company has installed In-Row cooling system that cools equipment based on the heat generated, and ensures that no energy is wasted in running compressors excessively to maintain the desired temperature levels. Further, as a part of building Specifications, your Company has installed VRV air cooled Air- conditioning system for comfort. The Company has also installed precision air-conditioning having inverter compressors and sensor units, which accurately detect the heat-level variations and release the required volume of coolant. Hence the compressor rotates at varied frequencies and speeds, thereby, saving energy.

As an ongoing process, your Company evaluates new technologies and techniques to make its infrastructure more energy efcient.

B) Foreign exchange earnings/outgo during the year under review

Your Company is engaged in the business of operating a Commodity Exchange and the Company endeavours to export its services as and when opportunities are available.

The details of foreign exchange earnings and outgo form a part of the significant accounting policies and note no. 27 of Notes to accounts.

RESEARCH AND DEVELOPMENT

As a result of constant research and development, your Company continuously strives to ofer new and wide-ranging products in the realm of commodity futures. Moreover, your Company customises products so as to meet the needs of a wide range of market participants. Extensive research is also conducted to sensitise policy makers of the required changes to further develop the commodity futures market.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956 with respect to the Directors'' Responsibility Statement, your Directors confirm that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

2. They have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of afairs of the Company at the end of the FY 2013-14 and of the profit of the Company for that period;

3. They have taken proper and sufcient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

4. They have prepared the annual accounts of the Company on a ''going concern'' basis.

The above have to be read along with the section on Auditors'' Report, given earlier in this Directors'' Report.

ACKNOWLEDGMENTS

Your Directors would like to place on record their sincere gratitude to the Forward Markets Commission, Ministry of Consumer Afairs, Food and Public Distribution, Department of Economic Afairs, Ministry of Finance, Reserve Bank of India, Foreign Investment Promotion Board, Securities and Exchange Board of India, BSE Limited, Ministry of Corporate Afairs, Department of Post, Shareholders, Financial Institutions, Bankers, Members of the Exchange and Business Associates for their continued support and faith in the Company. Your Directors also wish to place on record their appreciation for the contribution made by employees at all levels.

For Multi Commodity exchange of india limited

satyananda Mishra

Chairman Mumbai August 18, 2014


Mar 31, 2013

Dear Shareholders,

The Board of Directors is pleased to present the Eleventh Annual Report on the business and operations of your Company along with the Audited Statement of Accounts and the Auditors'' Report for the financial year (FY) ended March 31, 2013. The highlights for the year under review are given below:

Corporate Results

(in Rs. million, except for the pershare data)

STANDALONE CONSOLIDATED

2012-13 2011-12 2012-13 2011-12

Total income 6,446.95 6,310.26 6,451.90 6,313.88

Total operating expenditure 2,087.84 1,936.50 2,087.91 1,936.65

Profit before interest, depreciation,exceptional 4,359.11 4,373.76 4,363.99 4,377.23 items and tax

Less: Depreciation 307.47 271.72 307.47 271.72

Less: Interest 0.31 0.03 0.31 0.03

Less: Exceptional item - 142.28 - 142.28

Profit before tax 4,051.33 3,959.73 4,056.21 3,963.20

Provision for tax 1,064.94 1,097.85 1,064.94 1,097.85

Profit after tax 2,986.39 2,861.88 2,991.27 2,865.35

Add: Share of profits of associate - - 0.26 1.78

Less: Share of minority interest - - (0.01) 0.05

Add: Balance of profit of earlier years 6,242.27 5,090.82 6,251.18 5,094.43

Balance available for appropriation 9,228.66 7,952.70 9,242.70 7,961.61

Less: APPROPRIATIONS

Final dividend (Proposed) 611.98 305.99 611.98 305.99

Interim dividend (Paid) 611.98 917.97 611.98 917.97

Taxon Dividend 203.29 198.56 203.29 198.56

Transfer to General Reserve 298.64 286.19 298.64 286.19

Settlement Guarantee Fund (SGF) 1.84 1.72 1.84 1.72

Balance carried to Balance Sheet 7,500.93 6,242.27 7,514.97 6,251.18

Earnings per share (Rs.) (Basic & Diluted) 58.56 56.12 58.66 56.22

Performance

Your Company continues to grow steadily, both in terms of business and earnings. As India''s leading commodity futures exchange with a market share of 87.3 per cent in terms of the value of commodity futures contracts traded in FY2012-13. Your Company has broadened and deepened India''s commodity futures market and continues to create enhanced value for all its stakeholders.

The Exchange was the third largest commodity futures exchange in the world, in terms of the number of contracts traded in the calendar year (CY) 2012, based on the Futures Industry Association''s annual volume survey released in March 2013. Moreover, as per the survey, during CY2012, MCX was the world''s largest exchange in silver and gold futures, second largest in copper and natural gas futures, and the third largest in crude oil futures.

During the fiscal, your Exchange launched three new contracts. On September 27, 2012, your Exchange launched Silver 1000, the first-of-its-kind deliverable 1 kg silver futures contract with New Delhi as the base delivery centre; and Kapasia Khalli (cotton seed oil cake) futures contract. In October 2012, your Exchange launched Mild Steel ingot/billet contract, which conforms to a BIS 2830 standard and is based on Raipur steel prices. On May 13, 2013, the commodity derivatives market regulator, Forward Markets Commission (FMC) allowed commodity futures exchanges to resume trading in guar seed and guar gum contracts, trading in which were discontinued a year ago. Subsequently, on May 14, 2013, MCX launched contracts in both these commodities.

With an aim to provide quick data access to its users, your Company adopted the Bloomberg Global Identifiers (''BBGID'') across all MCX traded contracts on its website. Bloomberg''s Open Symbology is useful for all commodity trackers, as this service can be leveraged for a wide array of functions, such as trading, research, and mapping, among others.

The number of contracts traded on your Exchange in FY2012-13 stood at 375 million as compared with 390 million in FY2011-12. While the average daily turnover stood at Rs.487.9 billion in FY2012-13 as compared with Rs.503.13 billion in FY2011-12, it is noteworthy that on April 15, 2013 your Exchange recorded its highest daily turnover since inception of 71,199.41 billion.

The total turnover of the commodity futures traded on your Exchange stood at 7148,810.57 billion in FY2012-13, as against 7155,970.96 billion in the previous fiscal. For the year ended March 31, 2013, your Company''s total income increased by 2 per cent to 76,446.95 million from 76,310.26 million during the last fiscal. The operating income during the period under consideration was 75,239.62 million, as against 75,451.08 million in FY2011-12. Other income during FY2012-13 was 71,207.33 million, as against 7859.18 million in the previous fiscal.

The net profit after tax for the year ended March 31, 2013 increased by about 4 per cent to 72,986.39 million from 72,861.88 million in FY2011-12. The net worth as on March 31, 2013 stood at 711,546.50 million.

Dividend

After considering your Company''s profitability and the dividend pay-out policy adopted by your Directors, shareholders will be pleased to note that your Directors have declared and paid an interim dividend of 712 per equity share on the face value of 710 per share for FY2012-13, totaling to 7611.98 million.

The Directors have further recommended a final dividend of 712 per equity share on the face value of 710 per share, totaling to 7611.98 million, subject to the approval of Shareholders at the ensuing Annual General Meeting. The total dividend, including interim and final (if approved), aggregate to 724 per share amounting to 71223.96 million for the financial year ended March 31, 2013.

The total appropriation on account of interim and final dividend and corporate tax on dividend thereon was 71427.25 million. The dividend will be tax-free in the hands of shareholders.

Share Capital

There was no change in the share capital of the Company during the year under review. As on March 31, 2013, the paid up share capital of your Company stood at 7509.99 million comprising 50,998,369 equity shares of 710 each fully paid.

Deposits

Your Company had not invited any deposits from the public, and as such, no amount of principal or interest related thereto was outstanding on the date of the Balance Sheet as on March 31, 2013.

Buy Back of Equity Shares

During the period under review, your Company did not announce any scheme for buying back equity shares from its Shareholders. Accordingly, the requirements as specified under Section 77A of the Companies Act, 1956 do not apply.

Compliance with the Equity Structure Guidelines

Your Company is in compliance with the applicable ''Guidelines on the Equity Structure of the Nationwide Multi Commodity Exchanges after 5 years of operation'' dated July 29, 2009, as amended from time to time, issued by Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Distribution, Government of India.

Subsidiaries

The Consolidated financial statements presented by the Company include financial information of its subsidiaries, namely Multi Commodity Exchange Clearing Corporation Limited (MCXCCL) and SME Exchange of India Limited (SME). MCXCCL, a wholly-owned subsidiary of the Company, was set up for the purpose of having a separate clearing house to provide services such as clearing and settlement of trades and guaranteeing counterparty risk. As on date, MCXCCL has not commenced operations, pending FMC approval; and its present paid-up capital is Rs.60 million.

The Company has subscribed up to 51 per cent of the equity of SME, pursuant to the approval received from FMC by letter dated September 12, 2011 for an initial investment of Rs.0.51 million in SME. SME''s paid-up capital is Rs.1 million and is yet to commence operations.

In terms of the general circular no. 2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs in respect of section 212 of the Companies Act, 1956, the Board has accorded consent for not attaching the balance sheet of the subsidiaries with the accounts of the Company. Pursuant to the Circular, the gist of financial details of the subsidiaries is included elsewhere in the report and forms part of this Annual Report. The Consolidated financial statements are prepared in accordance with Accounting Standard-21 - Consolidated Financial Statements issued by the Institute of Chartered Accountants of India form a part of this Annual Report and are reflected in the consolidated accounts of the Company. The Annual accounts of the subsidiaries and the related information shall be made available to the members of the Company and its subsidiaries on request, and also for inspection at the registered office of the Company.

Consolidated Financial Statements

The audited Consolidated Financial Statements, based on the financial statements received from subsidiaries and associates, as approved by their respective Board of Directors, have been prepared in accordance with the requirements of Accounting Standard - 21 (AS-21) - "Consolidated Financial Statements," and Accounting Standard - 23 (AS-23) - "Accounting for Investments in Associates" in Consolidated Financial Statements as notified under the Companies (Accounting Standard) Rules, 2006.

Outlook

Your Exchange offers trading in commodity futures from a diverse range of classes including bullion, ferrous and non- ferrous metals, energy and agriculture. Hitherto, your Exchange occupied a dominant position in metal and energy segments. However, your Exchange has stepped up efforts to attract participation in agri-commodities as well, due to the following:

- Commodities Transaction Tax (CTT)—introduced in the Finance Act 2013 and notified on June 19, 2013— of 0.01 per cent has been levied on the value of derivative transactions of non-agricultural commodities with effect from July 1, 2013

- The imposition of CTT will have its impact on the average daily volume and consequently the transaction revenue and profitability of the Company, as it will substantially increase the cost of transactions in commodity futures, which can disincentivise participation in CTT-levied commodities.

The FC(R) Amendment Bill, 2010 was cleared by the Cabinet on October 04, 2012 and the Parliamentary Standing Committee examining the FC(R) Amendment Bill, 2010 noted, inter alia, that FMC should be made autonomous, and indices, intangible Products and options be allowed to be introduced. The Committee also recommended that institutions such as banks, insurance companies, mutual funds, etc. should be allowed to participate on commodity derivative exchanges. Your Company has been making representations at various forums on the importance and the urgency associated with the early passage of this Bill in the Parliament.

While awaiting the notification on the Corporate Social Responsibility (CSR) Rules 2012, your Company intends to achieve CSR objectives by integrating its business processes with social processes, and developing innovative business models which create shared value.

Your Company, as per FMC''s direction to disclose information about the contracts traded on exchanges on their respective websites, has uploaded members''data on the Exchange''s website, www.mcxindia.com.

During the FY2012-13, FMC took many regulatory initiatives for risk management, orderly trading and investor protection. To ensure transparency in the Indian commodity futures market, the Commission emphasised on more disclosures by exchanges, issued guidelines for regulating algorithmic trading in commodities futures market, made the registration by exchanges of each and every client for SMS and e-mail alerts mandatory. Moreover, FMC approved the funding ofthe expenditure for publishing dabba trading advertisements through Multi Commodity Exchange Investor (Client) Protection Fund.

Further, algorithmic trading in micro and mini contracts was discontinued with effect from January 1, 2013, upon notification from FMC. It formulated broad guidelines for the regulation of algorithmic trading, wherein the eligibility criteria for traders to obtain registration under algorithmic trading has been set.

In addition, during the fiscal, FMC prescribed the base minimum capital requirements for the members of national-level commodity derivative exchanges.

Your Company has instituted market safeguards and risk management techniques to ensure that members meet their financial obligations promptly, and the market place is protected from undesirable events.

Commitment to Quality

Your Company has always maintained a customer and quality centric approach. With this in mind, it has successfully cleared the rigorous surveillance audit for certification to ISO 9001:2008 Quality Management Systems standard.

Further, your Company has a proactive Risk Management approach, and conducts risk assessment activities on a periodic basis. The Company maintains its commitment towards information security, and successfully cleared the ISO/IEC 27001:2005 surveillance audit too during FY2012-13. This certification provides reassurance to all stakeholders that MCX takes information security concerns very seriously, and all appropriate measures are taken to ensure that non- compliances do not occur. Your Company has an effective Environment policy and is governed by it. It has also cleared the ISO 14001:2004 re-certification audit, and continues to monitor its environment management plan, which is developed on the basis of the "Environment Review" conducted to assess the impact ofthe Company''s activities.

Environmental Responsibility

Your Company, an ISO 14001:2004 certified organisation, is committed to minimising its environmental impacts through the efficient use of natural resources, including electricity, which is the key touch point of the Exchange''s technology-driven business.

It strives to optimise energy use through state-of-the-art facilities in its office building and business operations. Some initiatives that have helped your Company reduce its energy consumption include: an environment friendly data centre; effective and efficient use of IT systems; automating manual processes to reduce the use of paper; capacity enhancement by optimising trading applications; minimising leakages to decrease the load on air conditioning units; and increasing employee awareness on various environmental issues.

Your Company has developed an e-waste policy for the safe disposal of e-waste—the main hazardous waste disposed from its premises. Your Company partners with authorised e-waste recyclers such as Eco Recycling Limited and Attero Recycling helps it dispose its e-waste in an eco-friendly manner. The e-waste disposal is in turn minimised through best practices in maintenance and re-use.

With the transaction volumes increasing, it was essential for your Company to enhance its system capacity. MCX has upgraded its trading software to maximise the use of the existing hardware, as deploying additional hardware entails incremental power consumption and additional rack space required for more servers.

Corporate Social Opportunities (CSO)

The interdependence between your Company''s business practices and the stakeholders of the Indian commodity market ecosystem define the sustainability of its business. In FY2012-13, we undertook a review of the impacts of our business on society and the environment. Based on this, instead of defining CSO only as its community initiatives, your Company realigned the function as an integral aspect of its business. This enabled your Company to co-create business and social value for its stakeholders at large. The detailed note on the sustainability and inclusion is covered in the section on Sustainability and Inclusion of this Annual report.

Awards and Recognition

Your Company received the following awards during the year under review:

- ''Best Commodity Exchange of the year''award at the Global Cotton Conference 2013

- MCX''s IPO was awarded the''Best Mid-cap Equity Deal''in the entire Asia-Pacific for 2012; it is the first exchange in Asia Pacific to receive this recognition

- MCX''s Gold Petal contract received the FOW award for''the most innovative contract launch by an exchange'' under the metals category

- Business Superbrand award

- Best Commodity Exchange of the year award by the Bombay Bullion Association at the 9th India International Gold Convention, held at Hyderabad

Corporate Governance

Your Company continues to be committed to good corporate governance aligned with the best corporate practices. The report on Corporate Governance, stipulated by Clause 49 of the Listing Agreement, along with the certificate from the Auditors of the Company regarding compliance with Corporate Governance norms form a part of this Annual Report.

Management''s Discussion and Analysis Statement

Management''s Discussion and Analysis Statement as stipulated under the Listing Agreement forms a part of this Annual Report.

Directors

FMC, vide its letter dated July 3, 2013, nominated Mr. Dinesh Kumar Mehrotra, under section 6(2)(b) of the Forward Contracts (Regulation) Act, 1952 as an Independent Director on the Board of the Exchange for a period upto March 31, 2016. FMC vide its letter dated April 2, 2012 had appointed Mrs. Usha Suresh, Economic Adviser in the Commission, as an Independent Nominee Director on the Board of your Company to represent Central Government for a term up to March 31, 2013. As her term expired, and no intimation regarding her term''s extension was received from FMC, Mrs. Usha Suresh ceased to be a Director of the Company w.e.f. April 1, 2013. The Board placed on record its appreciation for the valuable contribution made by Mrs. Usha Suresh during her tenure as a Director of the Company.

Pursuant to the Guidelines for Constitution of the Board of Directors, Nomination of Independent Directors and appointment of CEO at the Nationwide Multi Commodity Exchanges issued by FMC read with the provisions of the Companies Act, 1956 and the Company''s Articles of Association, Mr. Venkat Chary, Mr. C. M. Maniar and Mr. Shvetal Vakil retire by rotation, and being eligible, offer themselves for re-appointment.

Auditors

The Auditors of your Company, Deloitte Haskins & Sells, Chartered Accountants, Mumbai (Regn. No. 117366W), will hold office until the conclusion of the ensuing Annual General Meeting of the Company. The Auditors have confirmed their eligibility and willingness to act as Auditors, if re-appointed, and the necessary certificate pursuant to Section 224(1B) of the Companies Act, 1956 has been received from them.

Auditors'' Report

Deloitte Haskins & Sells, Chartered Accountants, Mumbai (Regn. No. 117366W), have audited the accounts of your Company for FY2012-13. There are no qualifications in the Auditors'' Report.

However, the Auditors in their Audit observation have, as a "matter of emphasis" drawn attention to Note 35 regarding the Company''s stand of not treating member''s margins and income thereon as a part of the Settlement Guarantee Fund (SGF) contemplated under FMC''s directions, and instead crediting such margins to''Other current liabilities''and such income to the Statement of Profit and Loss (amounts unascertained).

The Company does not treat members margins and income thereon as part of SGF. On a review of international practices followed in this respect. In their submission to FMC, your Company has indicated that SGF is separate and distinct from deposits and margins placed by its members. MCX is awaiting FMC''s decision on this matter.

Particulars of Employees

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, names and other particulars of employees are required to be set out in the Annexure to the Directors'' Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report, excluding the aforesaid information is being sent to all the shareholders of the Company and others entitled thereto. Shareholders who are interested in obtaining such particulars may write to the Company at its registered office.

Particulars under section 9(2) of the Forward Contracts (Regulation) Act, 1952 read with rule 12 of the Forward Contracts (Regulation) Rules, 1954

In terms of the provisions of Section 9(2) of the Forward Contracts (Regulation) Act, 1952 read with Rule 12 of the Forward Contracts (Regulation) Rules, 1954, commodity exchanges are required to include certain particulars in their Annual Reports. These particulars for your Company are presented as Annexure I to Annexure VIII to the Directors'' Report.

Human Resource Development

Your Company believes that an organisation''s most invaluable resource is its employees. The Company''s focus is on developing the core competencies of employees, and establishing a strong bond among them by providing a stimulating environment that enables sharing of knowledge, information, experience and resources, across all levels. The Company endorses a work environment which is fair, equitable and comfortable for its workforce. In cognisance of the fact that employee satisfaction drives commitment, and commitment drives business performance, your Company has tried to create a cordial workplace atmosphere. Regular employee interaction events and contests are conducted, which give employees the deserved break from the day-to-day demanding situations. The key objective of these events is to promote employee bonding, build higher levels of employee engagement and organisational synergy, and bolster the sense of belonging and pride in working for your Company. While the Company continues to attract, retain and nurture talented people in its endeavour to be an employer of choice, it is noteworthy that over the years many of its erstwhile employees have re-joined the Company.

During the year under review, the Compensation Committee of the Board at their meetings held on October 3, 2012 and April 19, 2013 considered and approved the grant of 10,000 and 25,300 stock options representing equivalent number of equity shares of Rs.10/- each of the Company, respectively, to eligible employees under the Employee Stock Option Scheme - 2008, adopted through the Trust route.

The details of the options granted and outstanding up to March 31, 2013 as required by Clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure IX to this Report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/Outgo A) Conservation of energy, technology absorption

As the Company does not fall under any of the industries listed out in the Schedule appended to the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, particulars required to be disclosed with respect to conservation of energy and technology absorption, are not applicable to the Company.

The operations of your Company are not energy intensive. Your Company takes various measures to reduce energy consumption by using energy-efficient computer systems and procuring energy efficient equipment. As an ongoing process, your Company evaluates new technologies and techniques to make its infrastructure more energy efficient.

B) Foreign exchange earnings/outgo during the year under review

The Company is engaged in the business of operating a Commodity Exchange and the Company endeavours to export its services as and when opportunities are available.

The details of foreign exchange earnings and outgo forms a part of the significant accounting policies and note 26 of Notes to accounts.

Research and Development

As a result of constant research and development, your Company continuously strives to offer new and wide-ranging products in the realm of commodity futures. Moreover, your Company customises products so as to meet the needs of a wider range ofthe Indian commodity market''s participants. Extensive research is also conducted for informing policy makers about the required changes to further develop the commodity futures market.

Directors'' Responsibility Statement

As required by Section 217 (2AA) of the Companies Act 1956 your Directors confirm that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed;

2. They have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the FY2012-13 and of the profit of the Company for that period;

3. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

4. They have prepared the annual accounts on a''going concern basis''.

Acknowledgements

Your Directors would like to place on record their sincere gratitude to the Forward Markets Commission, Ministry of Consumer Affairs, Food and Public Distribution, Ministry of Finance, Reserve Bank of India, Foreign Investment Promotion Board, Securities and Exchange Board of India, BSE Limited, Department of Post, Shareholders, Financial Institutions, Bankers, Members of the Exchange and Business Associates for their continued support and faith in the Company. Your Directors also wish to place on record their appreciation for the contribution made by employees at all levels.

For and on behalf of the Board of Directors

Multi Commodity Exchange of India Limited

Mumbai Venkat Chary

July 29,2013 Chairman


Mar 31, 2012

Dear Shareholders,

The Directors are pleased to present their report on the business and operations of your Company together with the Audited Statement of Accounts and the Auditors' Report for the financial year ended March 31, 2012. The highlights for the year under review are given below:

Corporate Results (in Rs. million, except for the per share data)

Standalone Consolidated

2011-12 2010-11 2011-12 2010-11

Total Income 6,289.07 4,472.87 6,292.69 4,475.60

Total Operating Expenditure 1,915.31 1,771.54 1,915.46 1,771.54

Profit before Interest, depreciation, exceptional items and tax 4,373.76 2,701.33 4,377.23 2,704.06

Less: Depreciation 271.72 246.59 271.72 246.59

Less: Interest 0.03 0.20 0.03 0.20

Less: Exceptional item 142.28 - 142.28 -

Profit before tax 3,959.73 2,454.54 3,963.20 2,457.27

Provision for tax 1,097.85 726.30 1,097.85 726.30

Profit after tax 2,861.88 1,728.24 2,865.35 1,730.97

Add: Share of profits of associate - - 1.78 2.59

Less: Share of minority interest - - (0.05) -

Add: Balance of profit of earlier years 5,090.82 3,832.89 5,094.43 3,831.18

Balance available for appropriation 7,952.70 5,561.13 7,961.61 5,564.74

Less: APPROPRIATIONS

Final Dividend (Proposed) 305.99 254.99 305.99 254.99

Interim Dividend (Paid) 917.97 - 917.97 -

Tax on Dividend 198.56 41.37 198.56 41.37

Transfer to General Reserve 286.19 172.82 286.19 172.82

Settlement Guarantee Fund (SGF) 1.72 1.13 1.72 1.13

Balance carried to Balance Sheet 6,242.27 5,090.82 6,251.18 5,094.43

Earnings per share (Rs.) (Basic & Diluted) 56.12 33.89 56.22 33.99

Performance

Your Exchange continues to strengthen its business and scale up the value chain, thereby broadening and deepening the commodity futures industry and delivering enhanced value to all its stakeholders. Your Exchange was the third largest globally, in terms of the number of commodity futures contracts traded during CY 20114.

The total value of commodity futures contracts traded on MCX during the FY 2012 was Rs.155,970.96 billion as against Rs.98,414.81 billion in FY 2011, reflecting a growth of about 58 per cent. According to the data maintained by the industry regulator, the Forward Markets Commission (FMC), during the FY 2012, your Exchange had a market share of 86 per cent of the Indian commodity derivatives market in terms of the value of commodity futures contracts traded during the period. During CY 2011, your Exchange was the world's largest exchange in silver and gold, second largest in natural gas, and third largest in crude oil, with respect to the number of futures contracts traded3 Your Exchange recorded its highest daily turnover since inception of Rs. 1,116.66 billion on September 23, 2011.

Your Exchange launched a futures contract in one gram gold called Gold Petal (Mumbai-based contract) April 2011, Gold Petal New Delhi contracts in November 2011 and copper mini and nickel mini contracts in December 2011, all of which offer trading in smaller lot sizes. In October 2011, your Exchange also launched cotton (29mm) futures contracts to meet the needs of the cotton value chain.

Your Company's operating income grew from Rs.3,688.92 million in FY 2010-2011 to Rs.5,262.01 million in FY 2011-12, reflecting a growth of about 43 per cent. Other income for FY 2011-12 was Rs.1,027.06 million as against Rs.783.95 million in the previous year.

The net profit after tax for the year ended March 31, 2012 increased by 66 per cent from Rs.1,728.24 million in fiscal 2011 to Rs.2,861.88 million in fiscal 2012 and the net worth stood at Rs.9,989.16 million as on March 31, 2012.

Dividend

After considering your Company's profitability and the dividend pay-out policy adopted by your Directors, shareholders will be pleased to note that your Directors have declared and paid an interim dividend of Rs. 18 per equity share on face value of Rs. 10 per share for the financial year 2011-12, totaling to Rs. 917.97 million.

Your Directors have further recommended a final dividend of Rs. 6 per equity share on face value of Rs.10 per share, totaling to Rs. 305.99 million, subject to the approval of Shareholders at the ensuing Annual General Meeting. The total dividend, including interim and final (if approved), aggregate to Rs.24 per share amounting to Rs.1,223.96 million for the financial year ended March 31, 2012.

The total appropriation on account of interim and final dividend and corporate tax on dividend thereon is Rs.1,422.52 million. The dividend will be tax-free in the hands of the Shareholders.

Share Capital

There was no change in the share capital of the Company during the year under review. As on March 31, 2012, the paid up share capital of your Company stood at Rs.509.99 million comprising 50,998,369 equity shares of Rs.10 each fully paid.

Deposits

Your Company has not invited any deposits from the public, and as such, no amount of principal or interest related thereto was outstanding on the date of the Balance Sheet as on March 31, 2012.

Buy Back of Equity Shares

During the period under review, your Company did not announce any scheme for buy back of equity shares from its Shareholders. Accordingly, the requirements as specified under Section 77A of the Companies Act, 1956 do not apply.

Initial Public Offer (IPO) / Listing of Equity Shares and Compliance with the Equity Structure Guidelines

Your Company successfully completed its IPO in February 2012, and we are glad to inform you that on March 9, 2012, your Company became the first exchange in India to be listed. The IPO, which was a pure offer for sale by certain existing shareholders, was a grand success and received an overwhelming response from all the segments of the market—retail, FIIs (foreign institutional investors), Indian banks & institutions and HNIs (high net worth individuals). The retail portion was oversubscribed on the opening day itself (February 22, 2012). On the closing day (February 24, 2012), the retail portion was subscribed over 23 times and became one of the best IPOs ever in terms of retail interest generated in the market.

Considering the overwhelming response, the shares of MCX, on March 9, 2012, listed on BSE at a premium of 34 per cent on the issue price of Rs.1,032 (opening price was Rs.1,387/- and intraday price reached a peak of Rs.1,426/-). Consequent upon the completion of the IPO, Financial Technologies (India) Limited, the promoter of your Company, and your Company duly complied with the 'Guidelines on the Equity Structure of the Nationwide Multi Commodity Exchanges after 5 years of operation' dated July 29, 2009, issued by FMC.

Subsidiaries

Multi Commodity Exchange Clearing Corporation Limited (MCXCCL), a wholly-owned subsidiary of the Company, was set up for the purpose of having a separate clearing house to provide services such as clearing and settlement of trades and counterparty risk guarantee. As on date, MCXCCL has not commenced operations, pending FMC approval; and its present paid-up capital is Rs. 60 million.

The Company has subscribed up to 51 per cent of the equity of the SME Exchange of India Limited (SME) pursuant to the approval received from FMC by letter dated September 12, 2011 for an initial investment of Rs. 0.51 million in SME.

In terms of the general circular no. 2/2011 dated February 8, 2011 issued by the Ministry of Corporate Affairs in respect of section 212 of the Companies Act, 1956, the Board has accorded the consent for not attaching the balance sheet of the subsidiaries with the accounts of the Company. Pursuant to the Circular, the gist of financial details of the subsidiaries are included elsewhere in the report and forms part of this Annual Report. The Consolidated financial statements are prepared in accordance with Accounting Standard 21 – Consolidated Financial Statements issued by Institute of Chartered Accountants of India forms part of this Annual Report and are reflected in the consolidated accounts of the Company. The Annual accounts of the subsidiaries and the related information shall be available to the members of the Company and its subsidiaries on request and also for inspection at the registered office of the Company.

Consolidated Financial Statements

The audited Consolidated Financial Statements, based on the financial statements received from subsidiaries and associates, as approved by their respective Board of Directors, have been prepared in accordance with Accounting Standard - 21 (AS-21) on "Consolidated Financial Statements," Accounting Standard - 23 (AS-23) on Accounting for Investments in Associates issued by Companies (Accounting Standard) Rules, 2006.

Outlook

The India growth story is still credible as the drivers of growth—entrepreneurism, productivity, large consumer market with potentially large savings base, and strong legal system—are intact.

Your Company bears testimony to the growth and development witnessed by the Indian commodity futures market. Global demand and supply, increasing sophistication among participants, availability of innovative products, technological accessibility, deregulation and globalisation have paved the way for a sound global derivatives market growth. Although the Indian commodity markets have been restricted to domestic participation, the business practices and products and services offered can not only be globally referenced but are also highly correlated to the global commodity derivatives market.

Your Company aims to capitalise on its strengths to transform the markets through its relentless efforts focused on innovating, disseminating information, creating awareness and forging alliances with trade bodies and associations. These focused efforts would augment market participation, and concomitantly lead to the growth of the market, and strengthen India's footprint on the global canvas of commodity derivatives markets.

We are confident of bridging the gap created as a result of the current legal and regulatory restrictions in India's commodity derivatives market, once the FCRA Amendment Bill 2010 is passed into law. It is widely believed that the bill, which has been recommended by the Parliamentary Standing Committee of the Ministry of Consumer Affairs, Food and Public Distribution, on December 19, 2011, will be passed into law by the Parliament in the forthcoming session.

Anchored in our belief that listing on

an exchange is among the foremost attributes for a company aspiring for the best form of corporate governance, public scrutiny and transparency, MCX got listed on March 9, 2012. The Company now has the highest level of shareholder and public scrutiny, corporate governance and transparent trade practices, which are at par with global standards. We will continue to build upon our inimitable resource of trust and transparency.

Marketing, Educational And Awareness Efforts

Your Company employs various avenues to promote awareness and enhance knowledge about the commodity derivatives market. Various print and electronic media are employed for disseminating prices and spreading awareness. Your Company offers training and certification programmes to educate existing and potential market participants on commodity futures and equip them for various job opportunities in this industry. As a part of its continuing efforts to promote participation, your Company regularly interacts with brokers, physical market participants and other participants. A multitude of the awareness programmes for small and large participants, educational institutions, Government bodies, etc., are conducted by your Company jointly with FMC and other national exchanges. These awareness creation activities are partially supported by the Government and the FMC.

Your Company installs electronic tickers for price dissemination at various local mandis and other locations for wide-spread and efficient dissemination of price information to the physical market participants. In addition, your Company also disseminates futures prices through prominent commodity related websites, newspapers and electronic media channels, thus promoting availability of market information and intelligence.

Your Company strongly believes that increased awareness and understanding of the commodity derivatives market among the public would aid in building membership and user base.

Corporate Social Opportunities

Your Company treats its social responsibility as a strategic opportunity to make a difference in the communities it nurtures and to the society at large. Your Company performs two critical social responsibility functions: helping community development, and creating a long-term stakeholder constituency for strategic business needs. These functions are performed at two levels: at one level, this is performed within the Company; at another level, it reaches out to the broader community, thereby creating a critical interface between the your Company's core function and the society at large.

Using its domain expertise of commodity futures, your Company has devised projects with various partners thereby creating sustainable business models. Through its strategic alliances with several state postal departments of India Post, your Company has formed rural service centers, known as 'Gramin Suvidha Kendras'. Through this initiative, your Company provides farmers with information on spot and futures prices of their produce, expert advisory services, agricultural inputs, apart from advising them on new opportunities in agricultural marketing, risk management and finance. By providing farmers with future price information, your Company is spearheading a 'silent revolution'. Being armed with better information, farmers are able to make better decisions on production and marketing related activities. This model works on the principle and belief of expanding the farmers' role from the confines of 'producers' to broadened roles of 'marketers.'

The Gramin Suvidha Kendra project currently operates in six states - Rajasthan, Maharashtra, Madhya Pradesh, Uttar Pradesh, Karnataka and Gujarat. The project has 38 centres, which reach out to farmers through 575 branches of the Indian Postal department. To facilitate the project's initiatives, your Company supplies the information and communication technology infrastructure at each of the Gramin Suvidha Kendra centres.

In 2011, your Company became the first exchange in India to report its 'sustainability' performance for the year 2009-10. In 2012, your Company continued its sustainability journey and published an abridged version of its second Sustainability Report—'Commitment to Sustainability'—in January 2012. This Report describes your Company's approach to sustainability, environment and corporate governance process in its business. The report has been prepared in accordance with the level A of Global Reporting Initiative's (GRI) G3 Guidelines (2006) and is assured based on AA1000 Assurance standard 2008.

There are various other employee participatory programmes that signify the social concern of your Company. These include various initiatives such as 'HIV-AIDS' awareness drive, environment awareness drive, employee volunteerism, pay roll deduction, participation in the Mumbai Marathon, blood donation drive, and so on.

Corporate Governance

Your Company continues to be committed to good corporate governance aligned with the best corporate practices. The report on Corporate Governance stipulated by Clause 49 of the Listing Agreement, along with the certificate from the Auditors of the Company regarding compliance with Corporate Governance norms, forms part of this Annual Report.

Management's Discussion and Analysis Statement

Management's Discussion and Analysis Statement as stipulated under the Listing Agreement, forms a part of this Annual Report.

Directors

Mr. P. Satish was appointed as a Nominee of NABARD with effect from December 28, 2011 in place of Mr. S. Balan. Mr. K. Venugopal was appointed as a Nominee of State Bank of India (SBI) with effect from January 10, 2012 in place of Mr. B. Sriram. SBI relinquished its right of nomination on the Board and by a letter dated June 8, 2012, withdrew its nominee from the Board. Accordingly, Mr. K. Venugopal, nominee of SBI, ceased to be a director with effect from June 8, 2012.

FMC has extended the term of Mrs. Usha Suresh, Economic Advisor in the Commission, as Director on the Board to represent the Central Government till March 31, 2013. Consequent upon the expiry of the term of appointment as prescribed by the FMC, Mr. K.T. Chacko and Mrs. Ashima Goyal ceased to be Directors with effect from April 01, 2012. FMC, vide its letters dated June 13, 2012 and June 14, 2012, nominated Mr. Ravi Kamal Bhargava and Dr. Prakash Apte, respectively, as Independent Directors on the Board of your Company for the period till March 31, 2015.

Mr. P.G. Kakodkar and Mr. V. Hariharan ceased to be Directors of the Company with effect from June 28, 2012. In the casual vacancy created by the resignation of Mr. P. G. Kakodkar, Mr. P. R. Barpande is appointed as a Non-Executive Independent Director with effect from June 28, 2012.

Mr. Lambertus Rutten, on the expiry of his term as the MD & CEO on the close of business hours on June 30, 2012, ceased to be the MD & CEO of the Company, and he continues to be on the Board of Directors as Non- Executive Director with effect from July, 1, 2012.

Mr. Shreekant Javalgekar has been appointed as additional Director with effect from June 28, 2012 and the Board of Directors recommended his appointment as the MD & CEO of the Company, subject to the approval of FMC and Shareholders, for a period of three years with effect from July 01, 2012 or date of approval of FMC, whichever is later. Based on the FMC letter no. 4/5/2009-MD-I dated July 03, 2012, Mr. Javalgekar assumed office as MD & CEO of the Company from the date of his appointment, i.e. July 01, 2012.

The Board placed on record its sincere gratitude and support for the efforts of Mr. Lambertus Rutten during his tenure as the MD & CEO of the Company. The Board also placed on record its appreciation for the valuable contribution made by Mr. V. Hariharan, Mr. P.G. Kakodkar, Mr. S. Balan, Mr. K. Venugopal, Mr. B. Sriram, Mr. K.T. Chacko and Mrs. Ashima Goyal, during their respective tenures as Directors of the Company.

Pursuant to the Guidelines for Constitution of the Board of Directors, Nomination of Independent Directors and appointment of CEO at the Nationwide Multi Commodity Exchanges issued by FMC read with the provisions of the Companies Act, 1956 and the Company's Articles of Association, Mr. Paras Ajmera, Mr. Lambertus Rutten and Mr. P. Satish retire by rotation and, being eligible, offer themselves for re- appointment.

Auditors

The Auditors of your Company, B S R and Company, Chartered Accountants, Mumbai, hold office until the conclusion of the ensuing Annual General Meeting. The retiring Statutory Auditors, M/s. B S R and Company, Chartered Accountants, Mumbai (Regn. No. 128900W) have informed that they do not wish to seek reappointment as the Statutory Auditors of the Company at the ensuing Annual General Meeting.

As recommended by the Audit Committee and the Board of Directors at their respective meeting held on July 26, 2012, subject to the approval of the shareholders at the ensuing Annual General Meeting, M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai (Regn. No. 117366W) is proposed to be appointed as the Statutory Auditors of the Company. Deloitte Haskins & Sells, Chartered Accountants, have confirmed their eligibility and willingness to act as auditors, if appointed, and necessary certificate pursuant to section 224(1B) of the Companies Act, 1956, has been received from them.

Auditors' Report

M/s. B S R and Company, Chartered Accountants, have audited the accounts of the Company for the FY 2011-12. There are no qualifications in the Auditors' Report. The comments in the Auditors' Report read with the notes to accounts are self explanatory.

Particulars of Employees

In terms of the provisions of Section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 as amended, names and other particulars of the employees are required to be set out in the Annexure to the Directors' Report. However, as per the provisions of Section 219(1)(b)(iv) of the said Act, the Annual Report, excluding the aforesaid information, is being sent to all the shareholders of the Company and others entitled thereto. Shareholders who are interested in obtaining such particulars may write to the Company at its registered office.

Human Resource Development

MCX believes in providing a stimulating environment that helps develop core competencies of its employees and equips them to excel in a dynamic business environment. Sharing of knowledge, information, experience and resources across all levels ensures development of core competencies.

Your Company enjoys cordial employee relations across all levels. It fosters a culture of learning, innovations and collaboration, and focuses on offering a combination of benefits such as performance based compensation, career planning, providing for growth opportunities, and so on. The Human Resources department focuses on making work an enjoyable experience by providing the right balance between work and fun.

As of March 31, 2012, the total employee strength stood at 266.

During the year under review, the Compensation Committee, at its meeting held on October 24, 2011 granted 331,750 options under the Employee Stock option Scheme ESOP – 2008 to the eligible employees and Directors.

The details of the options granted and outstanding up to March 31, 2012 as required by Clause 12 of the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999, are set out in the Annexure IX to this Report.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings/Outgo

A) Conservation of energy, technology absorption

As the Company does not fall under any of the industries listed out in the Schedule appended to the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, particulars required to be disclosed with respect to conservation of energy and technology absorption, are not applicable to the Company.

The operations of your Company are not energy intensive. Your Company takes various measures to reduce energy consumption by using energy-efficient computer systems and procuring energy efficient equipment. As an ongoing process, your Company evaluates new technologies and techniques to make its infrastructure more energy efficient.

B) Foreign exchange earnings/outgo during the year under review

The Company is engaged in the business of operating a Commodity Exchange and the Company endeavours to export its services as and when opportunities are available. The details of foreign exchange earnings and outgo form a part of the significant accounting policies and note 26 of notes to accounts.

Research and Development

As a result of constant research and development, your Company continuously strives to offer new and wide-ranging products relating to futures trading in commodities. Moreover, your Company customises products so as to attract a broader base of participants and meet the needs of the Indian commodity market participants.

PARTICULARS UNDER SECTION 9(2) OF THE FORWARD CONTRACTS (REGULATION) ACT, 1952 READ WITH RULE 12 OF THE FORWARD CONTRACTS (REGULATION) RULES, 1954

In terms of the provisions of Section 9(2) of the Forward Contracts (Regulation) Act, 1952 read with Rule 12 of the Forward Contracts (Regulation) Rules, 1954, Commodity Exchanges are required to include certain particulars in their Annual Reports. These particulars for your Company are enclosed as Annexure I to Annexure VIII to the Directors' Report.

Directors' Responsibility Statement

As required by Section 217 (2AA) of the Companies Act, 1956 your Directors confirm that:

1. In the preparation of the annual accounts, the applicable accounting standards have been followed;

2. They have selected such accounting policies and applied them consistently, and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company at the end of the FY 2011-12 and of the profit of the Company for that period;

3. They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

4. They have prepared the annual accounts on a 'going concern basis'.

ACKNOWLEDGEMENTS

Your Directors would like to place on record their sincere gratitude to the Forward Markets Commission, Ministry of Consumer Affairs, Food and Public Distribution, Ministry of Finance, Reserve Bank of India, Foreign Investment Promotion Board, Securities and Exchange Board of India, BSE Limited, Department of Post, Shareholders, Financial Institutions, Bankers, Members of the Exchange and Business Associates for their continued support and faith in the Company. Your Directors also wish to place on record their appreciation for the contribution made by employees at all levels but for whose hard work, solidarity and support your Company's growth would not have been possible.

For and on behalf of the Board of Directors

Multi Commodity Exchange of India Limited

Mumbai Venkat Chary

July 26, 2012 Chairman


Mar 31, 2011

TO THE MEMBERS OF MCX STOCK EXCHANGE LIMITED

The Directors have pleasure in presenting their Third Annual Report and the Audited Statement of Accounts and AuditorsRs. Report for the period commencing from April 1, 2010 to March 31, 2011.

1. FINANCIAL RESULTS

(Rs. in crore) Particulars Period ended Period ended March 31, 2011 March 31, 2010

Total Income 39.15 29.52

Less: Expenditure 96.95 85.73

Loss Before Tax 57.80 56.21

Less: Provision For Tax - -

Loss After Tax carried to Balance Sheet 57.80 56.21

During the year under review, the Company registered a Total Income of Rs. 39.15 crore as against Rs. 29.52 crore during the previous year. The loss after tax for the year under review was Rs. 57.80 crore as compared to Rs. 56.21 crore in the previous year.

The loss, which has been continuing from the previous years, has been incurred due to lack of any operational revenue streams in the Currency Derivatives (CD) segment of the Exchange, which is currently, its only operational trading segment. This has arisen out of an inability of the Exchange to charge any transaction fee which is the mainstay revenue of any stock exchange. This was in turn caused by the abuse of a superdominant position by the ExchangeRs.s main competitor through adoption of a predatory zero pricing policy in its CD segment alone, which has now continued for more than two and a half years.

The Company had approached the Competition Commission of India for relief against the anticompetitive practices of the competitor and the Commission has now passed an order dated June 23, 2011, finding the competitor to be in contravention of several clauses of section 4 of the Competition Act, 2002 and inter alia directing under Section 27 of the Act as under -

a) directing the competitor to cease and desist from unfair pricing, exclusionary conduct and unfairly using its dominant position in other market/s to protect the CD market;

b) directing the competitor to maintain separate accounts for each segment from April 1, 2012;

c) directing the competitor to modify its zero price policy and ensure that appropriate transaction costs are levied - to be implemented within 60 days of the order;

d) imposing a penalty of Rs. 55.5 crore on the competitor;

Your Company hopes to do much better in the next year as conditions of free and fair competition are expected to be restored in the stock exchange services market in view of the above order.

The ExchangeRs.s applications for grant of regulatory approvals for commencement of trading in other segments and products have been rejected by an order dated September 23, 2010 passed by the Securities and Exchange Board of India (SEBI). The Exchange has challenged the said order by way of a writ petition filed before the HonRs.ble High Court of Bombay, which is pending admission. Granting of relief by the competition regulator in the CD segment and commencement of other segments, subject to outcome of the proceedings before the HonRs.ble High Court, would open up operational revenue streams for the Company.

2. CORPORATE AND BUSINESS BACKGROUND

MCX Stock Exchange Ltd., IndiaRs.s New Stock Exchange, was granted recognition by the Securities and Exchange Board of India (SEBI) under the Securities Contracts (Regulation) Act, 1956. It commenced trading in the CD segment on October 7, 2008, under the regulatory framework of SEBI and Reserve Bank of India (RBI).

Within a year of its launch, MCX-SX has proved its mettle as the thought leader and innovator of the industry by introducing innovative services and pioneering market development initiatives.

Currently, the Exchange provides a trading platform only for the CD segment. It offers currency futures contracts in four currency pairs

- USDINR, EURINR, GBPINR and JPYINR. The Exchange is poised to extend the offer to Interest Rate Futures (IRF), Equities (Cash & F&O), Indices and ETF, Debt and SME products, subject to regulatory approvals.

The Exchange has an on-line screen based order matching system which is hosted on a fully Fault Tolerant Stratus Server. This Stratus Server has "continuous processing" features, providing continuous availability. MCX-SX trading system is an order driven system. The identities of buyers and sellers are not disclosed as it is an anonymous order matching system. Orders entered into the trading system are subject to various validation requirements including trading parameters, turnover limits, and/or other restrictions placed, if any. Orders that do not meet the validation checks are not accepted by the trading system.

Among hosts of benefits, this state-of-the-art transparent national trading platform offers to a wide range of financial market participants - hedgers (i.e. exporters, importers, corporates and banks), investors and arbitrageurs -- price discovery and price risk management are of foremost importance.

TURNOVER AND MEMBERSHIP GROWTH

It was observed that the Average Daily Turnover in the Currency Futures segment has shown a marginal decrease from April 2010 to March 2011 i.e. the Average Daily Turnover which was at Rs.19651.14 crore in April 2010 fell to Rs.18359.02 crore in March 2011. The reduction in the turnover of Curren cy Futures volume was also experienced by the other major exchanges operating in the market. As USD/INR options has been included in the CD segment as per extant guidelines, the overall volumes of Currency Futures contract exclusively has shown a moderate decline.

However, as on March 2011, the Exchange had 734 members through 4556 users spread across 555 centers, as against 658 members through 4473 users spread across 498 centers as on March 2010. As such the number of users have increased, indicating broad based participation in the Currency Futures platform.

The turnover and open interest for the period April 01, 2010 to March 31, 2011 is reflected in the graph below

MARKET STATISTICS OF MCX-SX FOR THE PERIOD

Performance March 2011 March 2010

Approved no. of members (Registered with SEBI) 734.00 658.00

Centers participating across India 555.00 498.00

Average daily turnover (Rs. in cr.) 18,359.02 18,167.24

Highest turnover (Rs. in cr.) 26,741.38 22,756.36

Average daily volume (no. of contracts) 4,005,549 3,824,972

Highest no of contracts (no. of contracts) 5,865,789 4,771,129

MONTHLY TRADING STATISTICS

Currency Futures Segment at MCX-SX

Month/ Year No. of Contracts Trading Value Average Daily Open Interest at Traded (Rs. In Crs.) Trading Value the end of the month (Rs.in Crs.) (in lots)

0ct-08 11,19,968 5,521.21 324.78 60,055

Nov-08 30,54,640 15,114.21 839.68 55,711

Dec-08 47,01,492 22,936.59 1,092.22 1,19,233

Jan-09 49,89,594 24,415.10 1,220.75 2,38,887

Feb-09 65,00,630 32,194.85 1,694.47 2,04,217

Mar-09 94,81,245 48,644.02 2,560.21 1,94,265

Apr-09 75,47,128 37,858.10 2,366.13 1,05,957

May-09 1,20,53,551 58,469.29 2,923.46 2,08,805

Jun-09 1,41,98,087 67,984.93 3,090.22 1,93,771

Jul-09 1,81,88,940 88,290.01 3,838.70 3,46,072

Aug-09 1,86,48,790 90,292.29 4,514.61 4,82,549

Sep-09 2,26,36,371 109,665.81 5,771.88 4,13,206

0ct-09 3,28,49,655 153,629.82 7,681.49 4,74,485

Nov-09 3,46,66,197 161,641.09 8,082.05 5,02,301

Dec-09 4,25,13,360 198,497.62 9,452.27 4,25,451

Jan-10 6,35,91,431 292,344.89 14,617.24 5,95,355

Feb-10 6,47,73,311 322,635.46 16,980.81 5,37,524

Mar-10 7,64,99,457 363,344.81 18,167.24 4,23,314

Apr-10 8,16,07,363 373,371.63 19,651.14 5,54,539

May-10 8,97,51,764 423,075.05 21,153.75 5,57,883

Jun-10 8,88,14,522 425,087.62 19,322.16 8,32,531

Jul-10 6,64,15,185 320,015.51 14,546.16 7,80,189

Aug-10 6,09,67,200 291,018.50 13,858.02 7,93,594 Sep-10 7,88,07,686 366,194.76 18,309.74 9,00,451

Oct-10 8,00,26,906 358,428.74 17,068.04 8,09,412

Nov-10 7,29,63,218 332,252.82 15,821.56 9,08,559

Dec-10 6,03,88,799 276,019.30 12,546.33 8,14,370

Jan-117 40,71,176 341,912.84 17,095.64 8,67,501

Feb-11 6,12,49,728 282,742.21 14,881.17 7,56,052

Mar-11 8,81,22,092 403,898.50 18,359.02 7,94,788

Apr-11 5,96,20,093 270,380.70 16,898.79 8,11,777

May-11 7,76,11,606 357,484.50 17,023.07 7,20,828

Period No. of Contracts Traded Tading Valu (Rs. In Crs.)

2008-09 (Oct-Mar) 2,98,47,569 148,825.98

2009-10 (Apr-Mar) 40,81,66,278 1,944,654.11

2010-11 (Apr-Mar) 90,31,85,639 4,194,017.48

2011-12 (Apr-May) 13,72,31,699 627,865.20

MEMBERSHIP

Membership on MCX Stock Exchange Ltd. is of three types:

Trading Members (TM): Can trade on their own account and also their clients, but cannot clear the trades. They have to clear the trades through a clearing member by becoming its constituent.

Trading-cum-Clearing Members (TCM): Can trade and clear the trades on their own account and also on account of their clients.

Professional Clearing Members (PCM): Can only clear the trades of other members. They cannot trade either on their own account or clients.

TECHNOLOGY

The IT infrastructure at the Exchange has been designed with performance, reliability, redundancy and security as the key parameters.

The technology deployed includes the latest fault tolerant servers and a hybrid network (nationwide satellite network, terrestrial point to point, nationwide MPLS network and Internet links) which enables members

CERTIFICATIONS

In continuation with its commitment to provide quality-driven services to members, MCX-SX has successfully cleared the ISO 9001:2008 Surveillance Audit and has been recommended for continuation of this certification. Further, information security being a crucial aspect of day to day business to connect to the Exchange from any location across the length and breadth of the country. The IT components are hosted in a state of the art datacenter that is designed to support mission critical operations. The datacenter and all its components are monitored 24x7x365.

The global technology platform enables our members to undertake uninterrupted dealing even during sun outage time experienced by other exchanges.

Processes, MCX-SX continues to retain the ISO/IEC 27001:2005 certification for its effective Information Security Management System. As a step towards demonstrating its dedication towards sustaining the Environment, MCX-SX has also cleared the Surveillance Audit for ISO 14001:2004, and continues to hold the certification for the same.

Sr. No. Certificate Purpose / Scope Certificate Date Validity

1. ISO 9001:2008 Quality Management System (QMS) 16-09-2009 15-09-2012

2. ISO/IEC Information Security Management 16-09-2009 15-09-2012 27001:2005 System (ISMS)

3. ISO 14001:2004 Environmental Management System 16-09-2009 15-09-2012

NEW INITIATIVES

The Stock Exchange continues its initiatives to spread knowledge and awareness on Financial Markets. Some of the key initiatives taken in the Exchange in the last year include:

- Communique - Monthly Exchange Newsletter giving important developments across various Exchanges of the world.

- Market Update - Encompasses the happenings around the Global Financial Markets & Macro view on Indian Financial Markets.

- Conduct of Training & Seminars across the length and breadth of the country continued during the last year also.

THE WAY FORWARD

The Exchange is fully committed to introduce trading in new asset classes under the extant regulatory framework subject to necessary regulatory approvals. The Company was not allowed to commence operations in other segments or products by an order dated 23rd September, 2010, passed by SEBI. The Company has challenged the above mentioned order of SEBI before the HonRs.ble High Court of Bombay by way of writ petition and the matter is pending for admission.

The introduction of other asset classes and products would be done subject to necessary regulatory approvals with best research and enhanced dissemination of Financial Literacy by educating the market participants about the usefulness as well as the risk involved in various asset classes.

The finances of the company would improve with the order of the Competition Commission of India mentioned above and the Company hopes to play a more fulfilling role in the Indian economy & securities market.

3. DIVIDEND AND RESERVES

In view of the fact that the Company is in its nascent stage of operations and is currently incurring losses, the Board of Directors do not recommended any dividend on the equity capital of the Company. For the same reason, no amounts are available for carrying to reserves

4. SHARE CAPITAL

The Authorised Share Capital of the Company is Rs. 250,00,00,000/- divided into 250,00,00,000 equity shares of Rs. 1/- each.

The Paid up Capital of the Company is Rs. 54,33,03,000/- divided into 54,33,03,000 equity shares of Rs. 1/- each. The shareholding pattern is under:

Sr. No. Category of Shareholder No. of shares held Percentage of share holding

1. Promoters 5,43,30,000 10.00%

2. Banks 38,45,00,000 70.77%

3. Financial Institutions 9,90,40,000 18.23%

4. MCX Stock Exchange ESOP Trust 54,33,000 1.00%

Total 54,33,03,000 100.00%

A total of 119,66,30,000 transferable warrants issued under the scheme of reduction cum arrangement which was sanctioned by the

5. DIRECTORS

With a view to meet the requirements of the Board composition as specified by the SEBI and after obtaining requisite approvals from it, three Additional Directors Mr. S.U. Kamdar, Mr. P.R. Barpande and Prof. (Mrs.) Ashima Goyal, were appointed as Public Interest Directors in the Board Meeting held on March 12, 2011. With their appointment, the strength of the Board has risen to 18, which is the maximum sanctioned strength under Articles of the Company.

The three Additional Directors, Mr. S.U. Kamdar, Mr. P. R. Barpande and Prof. (Mrs.) Ashima Goyal will cease to hold office at the Third Annual General Meeting of the Company and are eligible for appointment as Directors. The Company has received a notice in writing together with requisite

HonRs.ble High Court of Bombay are presently held by two shareholders. deposit from a Member under Section 257 of the Companies Act, 1956 proposing their candidature for the office of Directors of the Company. Your Board recommend their appointment as Directors of the Company.

Mr. A. A. Badshah (representing Bank of India), Mr. V.K. Khanna (representing Union Bank of India), Mr. C. VR. Rajendran (representing Corporation Bank) and Mr. P.K. Chhokra (representing Punjab National Bank) were appointed as Directors at the last Annual General Meeting till the third Annual General Meeting in accordance with a rotational representation policy. However, having regard to the current status of the Exchange, it is proposed for the sake of continuity that the same directors may continue. The Company has received a notice in writing from a Member under Section 257 of the Companies Act, 1956 proposing candidature of Mr. A.A. Badshah, Mr. V.K. Khanna, Mr. C. VR. Rajendran and Mr. P.K. Chhokra for the office of Directors of the Company. Your Directors recommend their appointment as Directors of the Company.

Mr. B.D. Sumitra, Mr. C.M. Maniar, Dr. Nitish Sengupta and Mr. Atul Rai are liable to retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment.

6. MANAGEMENT

The management of the Company is headed by Mr. Joseph Massey, Managing Director & CEO, who is in overall charge of the affairs of the Company, subject to the superintendence and oversight of the Board of Directors. The CD segment, which is the currently operational segment of the Exchange, is headed by Mr. U. Venkataraman, CEO-CD Segment & Whole-time Director, who reports to the Managing Director. There is a team of highly experienced and effective senior management personnel leading different Departments of the Exchange, which reports to the Managing Director and the Whole-time Director.

7. HUMAN RESOURCES AND PARTICULARS OF EMPLOYEES

During the period under review, emphasis was placed on Human Resource Planning with the objective of optimum utilization of existing manpower. Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the DirectorsRs. Report for the period ended March 31, 2011, is given in Annexure A to this Report.

8. SUBSIDIARY

The CompanyRs.s subsidiary, MCX-SX Clearing Corporation Limited (MCX-SXCCL), was jointly promoted by your Company, Multi Commodity Exchange of India Ltd. (MCX) and Financial Technologies (India) Ltd. (FTIL), as a new age Clearing Corporation constituted to undertake clearing and settlement of deals in multi asset classes. MCX-SXCCL offers best-in- class services to its clearing members with the help of its state of the art risk management framework and unparalleled clearing and settlement systems with dedicated linkages with clearing partners.

The subsidiary was incorporated on November 7, 2008 and was permitted by SEBI to undertake clearing and settlement functions of trades done in MCX-SX on Januar y 2, 2009. The subsidiary commenced its operations on February 16, 2009 after completion of requisite formalities including opening of accounts and execution of agreements with participants. The subsidiary currently clears the deals entered in the CD segment of MCX-SX.

During the financial year 2010-11, the subsidiary has registered a total income of Rs. 121,086,568/- as against Rs. 120,575,406/- during the previous year. The profit after tax for the year under review was Rs. 9,963,090/- compared to Rs. 11,390,067 /- in the previous year.

During the financial year, the MCX-SXCCL had successfully carried out 249 settlements amounting to Rs. 2086.73 crore without any delay and shortages. On account of its robust risk management practices, Settlement Guarantee Fund has never been put to use. Some other highlights of the year are:-

a) Based on an assessment carried out by reputed consulting agency, Deloitte Touche Tohmatsu India Private Limited ("DTTIPL"), MCX-SXCCL observes CPSS- IOSCO recommendations for Securities Settlement Systems - an international benchmark for central counterparties.

b) MCX-SXCCL has retained LAAA (SO) by ICRA, indicating the highest level of safety of collaterals parked with a Clearing Corporation.

c) MCX-SXCCL became the first Indian Clearing Corporation to obtain ISO certifications for quality management sys tem (I SO 9001 -2 008) a n d information security management system (ISO 27001-2005) in its first year of operations.

d) During the financial year, MCX-SXCCL has empanelled IDBI Bank as a clearing bank, and Stock Holding Corporation of India Limited as a custodian of collaterals to provide wider choice to members at competitive terms.

e) MCX-SXCCL has implemented Risk Analysis & Management System (RAMS) to strengthen its Risk Management Capabilities. RAMS system provides for simulation of margins considering various scenarios of prices and volatility. A dedicated module for collateral management was introduced during the year. MCX- SXCCL has also introduced Secured FTP, an interface which offers high level of security for transfer of files with various clearing intermediaries.

Information regarding the subsidiary, in accordance with the provisions of Section 212 of the Companies Act, 1956 is attached to the Balance Sheet.

9. COMPLIANCES

The Company is recognized as a stock exchange by SEBI under Section 4 of the Securities Contracts (Regulation) Act, 1956 (SCRA). The Company being a stock exchange adheres to SEBI Act, 1992 and SCRA, 1956 and also the various circulars as prescribed by the SEBI and RBI from time to time. The Company follows an internal policy of comprehensive compliance reporting.

10. DEPOSITS

The Company has not accepted any public deposits since its inception.

11. AUDITORS

Consequent upon implementation of the scheme of reduction cum arrangement in March 2010, the shareholding pattern of the Company had undergone a change whereby about 67% of the companyRs.s equity capital came to be held by public sector banks.

Consequently, as per the provisions of Section 619B of the Companies Act, 1956 the auditors of the Company for the current financial year, M/s Chaturvedi & Shah, Chartered Accountants, Mumbai were appointed by the Comptroller and Auditor General of India (CAG). In view of continuance of the same shareholding pattern, the auditors for the FY 2011-12 would also be appointed by the CAG.

12. COMPOSITION OF AUDIT COMMITTEE

As per Section 292A of the Companies Act, 1956, the Company has constituted an Audit Committee of the Board, comprising of four directors, of which three are independent directors. The composition of the Audit Committee is as follows:

1. Mr. C. M. Maniar - Chairman

2. Mr. B. D. Sumitra - Member

3. Mr. Joseph Massey - Member

4. Mr. P. R. Barpande - Member

The Audit Committee met five times during the financial year 2010-11 to transact business.

13. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In view of the nature of activities which are being carried out on by the Company, Rules 2A and Rules 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy and technology absorptions are not applicable to the Company.

There was no foreign exchange earnings during the period ended March 31, 2011. The foreign exchange outgo during the year ended March 31, 2011 cumulatively amounted to Rs. 1,88,57,790/- as compared to Rs. 29,78,895/- in the year ended March 31, 2010.

The Company does not directly contribute to export growth, as it is not allowed to export its services. However, the Company provides a platform to the small and medium enterprises (SMEs) and resident Indians, who hitherto did not have easy access to the currency market and takes necessary initiatives to educate these potential users on the benefits of risk management using currency futures through seminars and events. By providing a hedging mechanism, it indirectly encourages exports. The Company has tied up with the Federation of Indian Export Organisations (FIEO) for creating awareness amongst its members on risk management of volatility in foreign currency.

14. DIRECTORSRs. RESPONSIBILITY STATEMENT

Pursuant to Section 21 7(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:-

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period;

iii. they have taken proper and sufficient care, to the best of their knowledge and ability, to maintain adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

iv. They have prepared the annual accounts on a going concern basis.

15. BUY-BACK OF SHARES

As during the last financial year, your Company did not have any scheme of buyback of shares, the requirements specified in Section 217(2B) read with Section 77A of the Companies Act, 1956 are not applicable to the Company.

16. EMPLOYEES STOCK OPTION PLAN

The Company had formulated the Rs.MCX Stock Exchange Employee Stock Option Scheme, 2009, pursuant to the authorization of shareholders granted at the First Annual General Meeting of the Company, and in order to attract, encourage, motivate and retain talent in the Company. The MCX Stock Exchange ESOP Trust has begun the process of granting options to eligible employees under the scheme. A further authorization for additional allocations under the said scheme or one or more new schemes is being sought from shareholders at the Third Annual General Meeting. The requisite disclosures in terms of Clause 12 and other provisions of the SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 are given in Annexure B to this Report.

17. ACKNOWLEDGEMENTS

The Directors would like to place on record their gratitude for the valuable guidance and support received from the Government of India, particularly Ministry of Finance and Ministry of Corporate Affairs, Securities and Exchange Board of India, Reserve Bank of India, participating banks, clearing banks, NSDL, CDSL, FEDAI, FIMMDA, FIEO, CII, FICCI, ASSOCHAM, IMC, IOSCO, SAFE, IGIDR, ICRIER, WFE, FIA , TIE, FISME and various other international, national and regional chambers of commerce, trade associations and all other broker-members, vendors, technology partners and all other business associates for the continuous support given by them to the Company.

The Directors also wish to convey their appreciation to the CompanyRs.s employees for their enormous personal efforts as well as their collective contribution which enabled the Company to meet the challenges set before it, including the fierce competition in the sector. The Board also acknowledged the contributions of the agencies, such as FTKMC, ICAI, ICSI, ICWAI, Door Darshan, Delhi University etc., who have inked Memoranda of Understanding with the Company to work towards the goal of "Financial Literacy and Financial Inclusion"

For and on behalf of the Board of Directors

Ashok Jha

Chairman

Date: June 30, 2011

Place: Mumbai


Mar 31, 2010

TO THE MEMBERS OF MCX STOCK EXCHANGE LIMITED

The Directors have pleasure in presenting their Second Annual Report and the Audited Statement of Accounts and Auditors' Report for the period commencing from April 1, 2009 to March 31, 2010.

1. Financial Results (Rs. in crores)

Period ended Period ended March 31, 2010 March 31, 2009

Total Income 29.52 7.58

Less: Expenditure 85.73 37.33

Loss Before Tax 56.21 29.75

Less: Provision For Tax - 0.12

Loss After Tax carried to Balance Sheet 56.21 29.87

During the year under review, the Company has registered a Total Income of Rs. 29.52 crore as against Rs. 7.58 crore for the previous year. The loss after tax for the year under review was Rs. 56.21 crore as compared to Rs. 29.87 crore for the previous year.

The loss has been mainly due to lack of any operational revenue streams in the Currency Derivatives Segment of the Exchange, which is its only currently operational trading segment. This has arisen out of an inability of the Exchange to charge any transaction fee which is the mainstay revenue of any stock exchange. This was in turn caused by the abuse of a super dominant position of the Exchange's main competitor by adoption of a predatory zero pricing policy in its Currency Derivatives Segment alone, which has now continued for more than 20 months.

The Company has approached the Competition Commission of India for relief and the Commission has found a prima facie case against the competitor and initiated investigations. The Exchange has also applied to SEBI for approvals to commence other trading segments, post compliance with the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006. Granting of relief by the competition regulator in the CD Segment and commencement of other segments would open up operational revenue streams for the Company as it is unlikely that the competitor will implement a predatory zero pricing policy in those segments.

In view of the above, your Directors are confident that the Company could perform better in the next year.

2. Corporate and Business Background

MCX Stock Exchange Ltd India's New Stock Exchange was granted recognition by the Securities and Exchange Board of India (SEBI) under the Securities Contracts (Regulation) Act, 1956. It commenced trading in the Currency Derivatives Segment on October 7, 2008, under the regulatory framework of Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI).

Within a year of its launch, MCX-SX has proved its mettle as the thought leader and innovator of the industry by introducing innovative services and pioneering market development initiatives.

Currently the Exchange provides trading platform only in Currency Derivatives Segment for trading in currency futures contracts in four currency pairs - USDINR, EURINR, GBPINR and JPYINR. The Exchange is poised to extend the offer to Interest Rate Futures (IRF), Equities (Cash & F&O), Indices and ETF, Debt and SME products, subject to regulatory approvals.

The Exchange has an on-line screen based order matching system which is hosted on a fully Fault Tolerant (FT) Stratus Server. This Stratus Server has “continuous processing” features, providing continuous availability. MCX-SX trading system is an order driven system. The identities of buyers and sellers are not disclosed as an anonymous order matching system. Orders entered into the Trading System are subject to various validation requirements including trading parameters, turnover limits, and/or other restrictions placed, if any. Orders that do not meet the validation checks are not accepted by the Trading System.

Among hosts of benefits, this state-of-the-art transparent national trading platform offers to a wide range of financial market participants -- hedgers (i.e. exporters, importers, corporates and banks), investors and arbitrageurs -- price discovery and price risk management are of foremost importance.

GROWTH

The Exchange has witnessed an impressive growth since its inception which continued during the financial year 2009-10. Average daily turnover increased from Rs. 2366.13 crore in April 2009 to Rs. 18167.24 crores in March 2010.

As on June 30, 2010 the Exchange had 672 members participating through 4132 users spread across 501 centers. The Exchange is the No.1 Currency Futures Exchange in India with a market share of 54.05% (May 2010).

The Exchange achieved the highest turnover of Rs. 25523.33 crores with 5,510,862 contracts across all exchanges in Currency Derivatives on May 11, 2010.

Market Statistics of MCX-SX for the Period...

Performance April 2009 March 2010

Approved no of members (Registered with 545 658 SEBI)

Centers participating across India 451 498

Average daily turnover (Rs in Crs.) 2366.13 18,167.24

Highest turnover (Rs in Crs.) 3912.08 22,756.36

Average daily volume (no. of contracts) 471,695 3824,972

Highest no of contracts (no. of contracts) 775,953 4771,129

The turnover and open interest for the period April 01, 2009 to March 31, 2010 are reflected in the graph below:

MONTHLY TRADING STATISTICS

Currency Futures Segment at MCX-SX

Open Interest No. of Average Daily Trading Value at the end of Month/ Year Contracts Trading Value (Rs. Cr) the month (in Traded (Rs.Cr) lots)

Oct-08 11,19,968 5,521.21 324.78 60,055

Nov-08 30,54,640 15,114.21 839.68 55,711

Dec-08 47,01,492 22,936.59 1,092.22 1,19,233

Jan-09 49,89,594 24,415.10 1,220.75 2,38,887

Feb-09 65,00,630 32,194.85 1,694.47 2,04,217

Mar-09 94,81,245 48,644.02 2,560.21 1,94,265

Apr-09 75,47,128 37,858.10 2,366.13 1,05,957

May-09 1,20,53,551 58,469.29 2,923.46 2,08,805

Jun-09 1,41,98,087 67,984.93 3,090.22 1,93,771

Jul-09 1,81,88,940 88,290.01 3,838.70 3,46,072

Aug-09 1,86,48,790 90,292.29 4,514.61 4,82,549

Sep-09 2,26,36,371 109,665.81 5,771.88 4,13,206

Oct-09 3,28,49,655 153,629.82 7,681.49 4,74,485

Nov-09 3,46,66,197 161,641.09 8,082.05 5,02,301

Dec-09 4,25,13,360 198,497.62 9,452.27 4,25,451

Jan-10 6,35,91,431 292,344.89 14,617.24 5,95,355

Feb-10 6,47,73,311 322,635.46 16,980.81 5,37,524

Mar-10 7,64,99,457 363,344.81 18,167.24 4,23,314

Apr-10 8,16,07,363 373,371.63 19,651.14 5,54,539

May-10 8,97,51,764 423,075.05 21,153.75 5,57,883

June-10 8,88,14,522 425,087.62 19,322.16 8,32,531

2008-09 (Aug-Mar) 2,98,47,569 148,825.98

2009-10 (Apr-Mar 40,81,66,278 1,944,654.11

2010-11 (Apr-June) 26,01,73,64 1,221,534.30

# Data across all underlying

MEMBERSHIP

Membership on MCX Stock Exchange Ltd. is of three types:

Trading Members (TM): Can trade on their own account and also their clients, but cannot clear the trades. They have to clear the trades through a clearing member by becoming its constituent. Trading-cum-Clearing Members (TCM): Can trade and clear the trades on their own account and also on account of their clients.

Professional Clearing Members (PCM): Can only clear the trades of other members. Cannot trade either on their own account or clients.

The Exchange had 672 members registered with SEBI as on June 30, 2010.

TECHNOLOGY

The IT infrastructure at the Exchange has been designed with performance, reliability, redundancy and security as the key parameters.

The technology deployed includes the latest fault tolerant servers and a hybrid network (nationwide satellite network, terrestrial point to point, nationwide MPLS network and Internet links) which enables members to connect to the Exchange from any location across the length and breadth of the country. The IT components are hosted in a state of the art datacenter that is designed to support mission critical operations. The datacenter and all its components are monitored 24x7x365.

The global technology platform enables our members to undertake uninterrupted dealing even during sun outage time experienced by other exchanges.

TRADING APPLICATION

Financial Information Exchange ("FIX") Protocol: MCX-SX was the first Stock Exchange to provide this facility in India w.e.f February 5, 2009.

The Financial Information exchange ("FIX") Protocol is a series of messaging specifications for the electronic communication of trade-related messages. FIX is a specification around which software developers can create commercial or open-source software.

MCX-SX supports trading using CTCL/IBT solutions (through FIX Gateway) developed using FIX API provided by the exchange. Exchange supports version 4.2 of the FIX protocol.

CERTIFICATIONS

1. ISO 9001:2008 -- The ISO 9001 standard addresses continual improvement in the performance of the organization. It emphasizes on enhancing Customer satisfaction and strengthening processes that would provide measurable results.

2. ISO/ IEC 27001:2005 - The ISO 27001 assists an organization in defining its Information Security management Systems (ISMS).The Standard provides guidelines to set up adequate and proportionate security controls, which protect Information assets of the organization, and give confidence to interested parties.

3. ISO 14001:2004 - “The ISO 14001 standard addresses “Environmental management “. It defines steps taken by the organization to minimize harmful effects on the environment, caused by its activities, and to achieve continual improvement of its environmental performance.

NEW INITIATIVES

The stock exchange has taken various pioneering initiatives to spread knowledge and awareness about the financial markets and to encourage participation by making processes simpler, more efficient and access to price information easier. Some of the key initiatives taken by the exchange are:

- Enabling price information of currency futures via SMS

- Reducing the gap of collections of mark-to-market (M2M) margins to the same day

- Deployment of superior technology for continued operation during sun outage

- Joining hands with various partners for Financial Literacy for Financial Inclusion

- Releasing the 1st handbook and CD on currency futures and interest rate futures

THE WAY FORWARD

The Exchange is committed to continuously expand its menu of offerings by introducing trading in new asset classes under the extant regulatory framework. To begin with, the Exchange will introduce trades in Equity, Debt, Interest Rates, Index and Exchange Traded Funds, subject to regulatory approvals. After achieving compliance with the Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006 through the scheme of reduction cum arrangement as explained subsequently, the Exchange had applied to SEBI for such regulatory approvals. In view of there being no further progress in the matter, the Exchange has filed a writ petition in the Hon'ble High Court of Bombay seeking a direction to SEBI to grant the regulatory approvals.

The introduction of all the stated assets and their variants would be done with best research and education, product innovation and enhanced dissemination of financial literacy for financial inclusion.

3. Dividend and Reserves

In view of the fact that the Company is in its nascent stage of operations and is currently incurring losses, the Board of Directors do not recommended any dividend on the equity capital of the Company. For the same reason, no amounts are available for carrying to reserves.

4. Share Capital

The Authorised Share Capital of the Company is Rs. 250,00,00,000/- divided into 250,00,00,000 equity shares of Re. 1/- each. The Paid up Capital of the Company is Rs. 54,33,03,000/- divided into 54,33,03,000 equity shares of Re. 1/- each. The shareholding pattern is under:

Sr. No. of shares Percentage of Category of Shareholder No. held shareholding

1. Promoters 5,43,30,000 10.00%

2. Banks 38,45,00,000 70.77%

3. Financial Institutions 9,90,40,000 18.23%

4. MCX Stock Exchange ESOP Trust 54,33,000 1.00%

Total 54,33,03,000 100.00%

In order to comply with the shareholding restrictions laid down in Securities Contracts (Regulation) (Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges) Regulations, 2006 (the “MIMPS Regulations”), the Company had, with the unanimous approval of its Board and shareholders and after sanction of the Hon'ble High Court of Bombay, implemented a Scheme of Reduction cum Arrangement under Sections 100-104 and 391-393 of the Companies Act, 1956, whereby the shares held by shareholders in excess of the permissible limits were cancelled and extinguished and warrants were issued to the said shareholders.

Consequent upon implementation of the Scheme, the total shareholding of banks increased to 89% and that of Financial Technologies (India) Ltd. and Multi Commodity Exchange of India Ltd. got reduced to 5% each with the ESOP Trust holding 1%. In all 119,66,30,000 shares were reduced and cancelled. There was no cash outflow from the Company under the Scheme and the reducing shareholders were allotted an equivalent number of warrants (119,66,30,000 warrants) in terms of the Scheme.

5. Directors

Pursuant to approval of its shareholders, the Company had, during the Financial Year 2009-10, amended its Articles of Association to increase the strength of its Board of Directors from 12 to 18 to include representation from a larger number of stakeholders and persons representing public interest, after obtaining requisite approvals from the Securities and Exchange Board of India (SEBI) and the Central Government.

In view of implementation of the Scheme of Reduction cum Arrangement, it was decided to provide Directorships on rotational basis to Banks and Financial Institutions who were holding equity shareholdings in the Company, in order to benefit from their experience in financial market for period of one year each.

Mr. P. G. Kakodkar resigned from the Board w.e.f December 19, 2009. The Board appointed Mr. Atul Rai, CEO & MD of IFCI Ltd. as a Director in the casual vacancy caused upon the resignation as per Section 262 of the Companies Act, 1956.

Dr. S. A. Dave and Mr. S. Rajendran had tendered their resignations and ceased to be Directors of the Company from March 31, 2010 and June 22, 2010 respectively.

In pursuance of Section 260 of the Companies Act, 1956, Mr. C. VR. Rajendran (representing Corporation Bank), Mr. A. A. Badshah (representing Bank of India) and Mr. Shahzaad Dalal (representing IL&FS Financial Services Ltd.) were appointed as Additional Directors of the Company by the Board on April 30, 2010. Mr. P. K. Chhokra ( representing Punjab National Bank) and Mr. V.K. Khanna (representing Union Bank of India) was appointed as Additional Directors of the Company by the Board on June 23, 2010, in replacement of Mr. S. Rajendran (who earlier represented Union Bank of India), as desired by the Bank. All of them will cease to hold office at the Second Annual General Meeting of the Company and are eligible for appointment as Directors. It is proposed that they may be appointed as Directors for a period of one year till the next Annual General Meeting, as they could not complete their full year due to their recent appointments.

The Company has received notices in writing from Members under Section 257 of the Companies Act, 1956 proposing their candidature for the office of Directors of the Company. Your Directors recommend their appointment as Directors of the Company, for a period of one year. Upon their ceasing to hold office at the end of one year, directorships shall be offered to other shareholders in accordance with the policy of rotation.

Mr. Vepa Kamesam and Mr. V. Hariharan are liable to retire by rotation at the ensuing Annual General Meeting. Being eligible, Mr. Vepa Kamesam and Mr. V. Hariharan offer themselves for re-appointment.

6. Management

The management of the Company is headed by Mr. Joseph Massey, Managing Director & CEO, who is in overall charge of the affairs of the Company, subject to the superintendence and oversight of the Board of Directors. The Currency Derivatives Segment, which is the currently operational segment of the Exchange, is headed by Mr. U. Venkataraman, CEO-CD Segment & Whole-time Director, who reports to the Managing Director. There is a team of highly experienced and effective senior management leading the different Departments of the Exchange, which reports to the Managing Director and the Whole-time Director.

7. Human Resources

During the period under review, emphasis was placed to Human Resource Planning with the objective of optimum utilization of existing manpower. The total strength of employees of the Company as on March 31, 2010 was 164.

8. Subsidiary

The Company's subsidiary, MCX-SX Clearing Corporation Limited (MCX-SXCCL), was jointly promoted by your Company, Multi-Commodity Exchange of India Ltd. (MCX) and Financial Technologies India Ltd. (FTIL), as a new age Clearing Corporation constituted to undertake clearing and settlement of deals in multi asset classes. The Company offers best-in-class services to its clearing members with the help of its state of the art risk management framework and unparalleled clearing and settlement systems with dedicated linkages with clearing partners.

The subsidiary was incorporated on November 7, 2008 and was permitted by SEBI to undertake clearing and settlement functions of trades done in MCX-SX on January 2, 2009. The subsidiary commenced its operations on February 16, 2009 after completion of requisite formalities including opening of accounts and execution of agreements with participants. The subsidiary currently clears the deals entered in the Currency Derivatives Segment of MCX-SX.

During the financial year 2009-10, the Company has registered the total income of Rs. 12,05,75,406/- as against Rs. 1,58,26,458/- for the previous year. The Profit after tax for the year under review was Rs. 1,13,90,067/- as compared to Rs. 14,42,659/- for the previous year.

During the financial year, the Clearing Corporation had successfully carried out 240 settlements amounting to Rs. 937.53 Crores without any delay and shortages. On account of its robust risk management practices, SGF has never been put to use. Some other highlights during the year are:-

a) MCX-SX CCL was rated LAAA (SO) by ICRA, indicating the highest level of safety of collaterals parked with the Clearing Corporation.

b) MCX-SX CCL became the first Indian Clearing Corporation to obtain ISO certifications for quality management system (ISO 9001-2008) and information security management system (ISO 27001-2005) in its first year of operations.

c) MCX-SX was the first in India to start collection of MTM pay-in prior to start of next day trading in the currency derivatives market, which is being implemented by MCX-SX CCL since the transfer of clearing and settlement functions to it.

d) With effect from February 01, 2010, MCX-SX CCL started clearing and settlement services on the three newly introduced currency pairs viz, EUR-INR, GBP-INR and JPY- INR, after putting in place all requisite changes in the systems.

e) MCX-SX CCL had initiated an innovative method called BGS (Bank Gateway System) for accepting cash collateral from the clearing members through the clearing banks.

9. Compliances

The Company is recognized as a stock exchange by Securities and Exchange Board of India under section 4 of the Securities Contracts (Regulation) Act, 1956 (SCRA). The Company being a stock exchange adheres to SEBI Act, 1992 and SCRA, 1956 and also the various circulars as prescribed by the SEBI and Reserve Bank of India from time to time.

10. Deposits

The Company has not accepted any Public deposits during the Financial Year ended March 31, 2010.

11. Auditors

Consequent upon implementation of the scheme of reduction cum arrangement, as mentioned above, the shareholding pattern of the Company had undergone a change whereby about 67% of the company's equity capital is now held by public sector banks.

Consequently, the provisions of section 619B of the Companies Act, 1956 have been attracted to the Company, whereby the auditors of the Company for the current financial year would have to be appointed by the Comptroller and Auditor General of India (CAG).

The Exchange is shortly writing to CAG for appointing an auditor under section 619B read with 619 of the Companies Act, 1956.

12. Composition of Audit Committee

As per Section 292A of the Companies Act, 1956, the Company has constituted an Audit Committee of the Board, comprising of three directors of which two are independent, non- executive directors. The composition of the Audit Committee is as follows:

1. Mr. C.M. Maniar - Chairman

2. Mr. B. D. Sumitra - Member

3. Mr. Joseph Massey - Member

The Audit Committee met four times during the Financial Year 2009-10 to transact business.

13. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

In view of the nature of activities which are being carried out on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy, technology absorption and foreign exchange earnings outgo, respectively, are not applicable to the Company.

The Company does not directly contribute to export growth, as it is not allowed to export its services. However, The Company provides a platform to the small and medium enterprises (SMEs) and resident Indians, who hitherto did not have easy access to the currency market and takes the necessary initiative to educate these potential users on the benefits of risk management using currency futures through seminars and events. By providing a hedging mechanism, it indirectly encourages exports. The Company has tied up with the Federation of

Indian Export Organisations (FIEO) for creating awareness amongst its members for risk management of volatility in foreign currency.

There were no foreign exchange earnings during the period ended March 31, 2010. The foreign exchange outgo during the period ended March 31, 2010 cumulatively amounted to Rs. 2,978,895/- as compared to Rs. 694,801/- in the period ended March 31, 2009.

14. Particulars Of Employees

Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors' Report for the period ended March 31, 2010, is given in Annexure A to this Report.

15. Directors' Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:-

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period;

iii. they have taken proper and sufficient care, to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

iv. they have prepared the annual accounts on a going concern basis.

16. Buy-Back Of Shares

As during the last financial year, your Company did not have any scheme of buyback of shares, the requirements specified in section 217(2B) read with section 77A of the Companies Act, 1956 are not applicable to the Company.

17. Employees Stock Option Plan

The Company had formulated the 'MCX Stock Exchange Employee Stock Option Scheme, 2009', pursuant to the authorization of shareholders granted at the First Annual General Meeting of the Company, and in order to attract, encourage, motivate and retain talent in the Company. The MCX Stock Exchange ESOP Trust has begun the process of granting options to eligible employees under the scheme.

The requisite disclosures in terms of Clause 12 and other provisions of the SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 are given in Annexure B to this Report.

18. ACKNOWLEDGEMENTS

The Directors would like to place on record their gratitude for the valuable guidance and support received from the Government of India, particularly Ministry of Finance and Ministry of Corporate Affairs, Securities and Exchange Board of India, Reserve Bank of India, participating banks, clearing banks, NSDL, CDSL, FEDAI, FIMMDA, FIEO, CII, FICCI, ASSOCHAM, IMC, IOSCO, SAFE, IGIDR, ICRIER, WFE, FIA and various other international, national and regional chambers of commerce, trade associations and all other broker-members, vendors, technology partners and all other business associates for the continuous support given by them to the Company.

The Directors also wish to convey their appreciation to the Company's employees for their enormous personal efforts as well as their collective contribution which enabled the Company to meet the challenges set before it, including the fierce competition in the sector. The Board also acknowledged the contributions of the agencies, such as FTKMC, ICAI, ICSI, ICWAI, Door Darshan, Delhi University etc., who have inked Memoranda of Understanding with the Company to work towards the goal of “Financial Literacy and Financial Inclusion”.

On behalf of the Board of Directors

Ashok Jha Chairman

Mumbai, July 17, 2010


Mar 31, 2009

TO THE MEMBERS OF MCX STOCK EXCHANGE LIMITED

The Directors have pleasure in presenting their First Annual Report and the Audited Statement of Accounts and Auditors' Report for the period commencing from August 14, 2008 to March 31, 2009.

1. FINANCIAL RESULTS

(Rs. in crores) Period ended March 31, 2009

Total Income 7.58

Less: Expenditure 37.33

Loss Before Tax 29.75

Less: Provision For Tax 0.12

Loss After Tax carried to Balance Sheet (29.87)

As these are the first financial results of the Company, prior year comparatives have not been given.

2. CORPORATE AND BUSINESS BACKGROUND

The Company was incorporated on August 14, 2008 and recognized as a stock exchange by Securities and Exchange Board of India (SEBI) under section 4 of the Securities Contracts (Regulation) Act, 1956 with effect from September 16, 2008. The Exchange was promoted by Multi Commodity Exchange of India Limited (MCX) and Financial Technologies (India) Ltd. (FTIL). The Exchange currently has approval to operate its Currency Derivatives Segment and presently USD-INR contracts of 1-12 months maturity are being traded on the Segment, in terms of the regulatory structure laid down by SEBI and Reserve Bank of India (RBI). The Exchange also holds necessary authorization from RBI under section 10 of the Foreign Exchange Management Act, 1999. The Exchange intends to commence further Segments upon receiving requisite approval from SEBI.

The Exchange through its Currency Derivatives Segment (CD Segment) provides a platform to the banks, corporates, importers, exporters, small and medium enterprises (SMEs) and resident Indians to hedge their currency risk. The Exchange has taken and would continue to take pioneering initiatives to educate investors and potential users on the benefits and risks of trading in currency futures through various seminars and events organized across the length and breadth of our country. The results are seen in the increase of volumes in trading on the CD Segment. The daily average turnover has increased from Rs. 324.78 crores in the first month of its operations to Rs. 2923.46 crores in May 2009.

Your Directors are pleased to inform that the National Institute of Securities Market (NISM), a public trust promoted by SEBI has appointed the Exchange as Test Administrator for its Certification Programme.

3. DIVIDEND AND RESERVES

In view of the fact that the Company is in its nascent stage of operations and is currently incurring losses, the Board of Directors has not recommended any dividend on the equity capital of the Company. For the same reason, no amounts are available for carrying to reserves.

4. OPERATIONS AND OUTLOOK

During the Financial Year 2008-09, the Company had a total income of Rs. 7.58 crores and incurred a net loss after tax of Rs. 29.87 crores. The primary reason for this is the Exchange's inability to charge transaction fee (which is the main revenue stream for any stock exchange operating this Segment) on account of the predatory pricing practices adopted by the competitors. The magnitude of loss can also be attributed in part to the initial cost of set-up of the Exchange and due to expenditure involved in creating awareness of MCX Stock Exchange and the Currency Derivatives Segment. The Exchange has granted waiver of transaction fee in the Currency Derivatives Segment to match the pricing of the competitor and maintain the existing market share. This waiver was introduced and was extended from time to time in line with the actions of competitors. The Company is expected to perform better in the next year with additional segments.

The exchange traded currency derivatives market is at a nascent stage in India, which has rapidly picked up in terms of volumes. This can be attributed in part at least to the various initiatives of the Exchange to spread awareness and expand the reach across geographical regions of the country.

The RBI-SEBI Standing Technical Committee has recently proposed introduction of interest rate futures contracts on the CD Segment of stock exchanges. The Exchange has taken the necessary initiative and indicated to SEBI its preparedness for introducing the new product for trading on its platform. Though interest rate futures contracts have already been in vougue in another Exchange in India for six years now, the product has not taken off due to various factors. This situation is likely to change in light of the revised framework proposed by RBI and SEBI. Upon approval of SEBI to introduce the product, the Exchange would continue its usual initiatives to spread awareness and education about the new product also and nurture a market therefor.

5. SHARE CAPITAL

The Company was promoted as a 51% subsidiary of MCX with FTIL holding 49%. The Authorised Share Capital of the Company was increased from time to time to meet the growing needs of the Exchange. The Company was incorporated with a paid-up Share Capital of Rs. 10 lakhs. The outstanding equity shares of the Company of Rs. 10/- each were subdivided into corresponding number of equity shares of Re.1/- each on September 20, 2008.

As at March 31, 2009, the paid-up Share Capital of the Company was Rs. 135,00,00,000 divided into 135,00,00,000 Equity Shares of Re.1/- each. Subsequent to the balance sheet date, 2.5 crore shares and 6.25 crore shares respectively have been allotted to two banks. The Exchange is taking further steps to broad base its shareholding.

6. DIRECTORS

The Company at its Extraordinary General Meeting held on August 14, 2008 appointed Mr. Joseph Massey, Mr. V. Hariharan and Mr. P.G. Kakodkar as the first directors of the Company. One of them shall retire by rotation at the first AGM of the Company in terms of section 255 of the Companies Act, 1956. On a drawal of lots it has been decided that Mr. P.G. Kakodkar would retire by rotation at the first AGM. Being eligible, he offers himself for re-appointment.

In pursuance of Section 260 of the Companies Act, 1956, Mr. Jignesh Shah, Mr. Vepa Kamesam, Mr. B. D. Sumitra, Mr. S. S. Thakur and Mr. C.M. Maniar were appointed as Additional Directors on the Board of the Company, w.e.f., October 6, 2008. Mr. U. Venkataraman had joined as an Additional Director and Whole-time Director w.e.f., February 16, 2009. Mr. Ashok Jha, Dr. S.A. Dave and Dr. Nitish Sengupta were appointed as Additional Directors of the Company by the Board on June 26, 2009. All of them shall cease to hold office at the First Annual General Meeting of the Company and are eligible for appointment as Directors.

The Company has received notices in writing from Members under Section 257 of the Companies Act, 1956 proposing their candidature for the office of Directors of the Company. Your Directors recommend their appointment as Directors of the Company.

7. MANAGEMENT

The key managerial personnel of the Company are Mr. Joseph Massey, Managing Director & CEO and Mr. U. Venkataraman, CEO-Currency Derivatives Segment & Whole-time Director. Previously Mr. Massey held top positions at Multi Commodity Exchange of India (MCX), Interconnected Stock Exchange of India (ISE) and Vadodara Stock Exchange (VSE). His expertise greatly helps the new exchange to establish itself in the fiercely competitive environment. He also has good international exposure also in the exchange sphere and had officially visited all prominent overseas exchanges including New York Stock Exchange, NASDAQ, New York Mercantile Exchange, London Stock Exchange, London Metal Exchange and Singapore Stock Exchange. Mr. Venkataraman prior to joining the Exchange as its CEO- CD Segment, was the Head-Treasury, IDBI Bank Ltd., where he was in overall charge of treasury operations of the Bank. He represented the Bank as a Member in the Managing Committee of FEDAI and in FIMMDA. Mr. Venkataraman had travelled widely and is a veteran in the fields of money markets and forex markets.

8. HUMAN RESOURCES

During the period under review, emphasis was given to Human Resource Planning with the objective of optimum utilization of existing manpower. The total strength of employees of the Exchange as on March 31, 2009 was 115 and as on date is 141.

9. SUBSIDIARY COMPANY

MCX-SX Clearing Corporation Ltd. (MCX-SX CCL), is the Company's sole subsidiary. The Company holds 51% equity stake in the subsidiary with the balance being held by Multi Commodity Exchange of India Limited (26%) and Financial Technologies (India) Limited (23%). The Subsidiary was set up to operate as an independent clearing corporation as envisaged in section 8A of the Securities Contracts (Regulation) Act, 1956 and the Report of the RBI-SEBI Standing Technical Committee on Exchange Traded Currency Futures.

MCX-SX CCL presently functions as an independent clearing corporation for clearing and settling the trades taking place in the Currency Derivatives Segment of MCX Stock Exchange Ltd., as required by SEBI. It acts as a central counterparty to such trades and provides full novation in respect of such trades. The Company has been authorized by SEBI and RBI to undertake the clearing and settlement functions in respect of trades done on Currency Futures Segment of MCX-SX. The Company commenced its operations on February 16, 2009. The documents as specified in Section 212 of the Companies Act, 1956 are attached in respect of the subsidiary.

10. COMPLIANCES

The Company is recognized as a stock exchange by Securities and Exchange Board of India under section 4 of the Securities Contracts (Regulation) Act, 1956 (SCRA). The Company being a stock exchange adheres to SEBI Act, 1992 and SCRA, 1956 and also the various circulars as prescribed by the SEBI and Reserve Bank of India from time to time.

11. DEPOSITS

The Company has not accepted any Public deposits during the Financial Year ended March 31, 2009.

12. AUDITORS

At the extra-ordinary general meeting of the Company held on May 21, 2009, the Company appointed M/s B S R and Company, Chartered Accountants, Mumbai, as the auditors of the Company in place of M/s Mukesh P. Shah & Co., Chartered Accountants.

M/s B S R and Company, Chartered Accountants have confirmed that their appointment will be within the limits as prescribed under section 224(1B) of the Companies Act, 1956. The Directors recommend that they may be re-appointed as auditors of the Company for the second financial year also.

If appointed, M/s B S R and Company, Chartered Accountants shall hold office till the conclusion of the second Annual General Meeting of the Company.

13. COMPOSITION OF AUDIT COMMITTEE

As per Section 292A of the Companies Act, 1956, the Company has constituted an Audit Committee of the Board, comprising of three directors of which two are independent, non- executive directors. The composition of the Audit Committee is as follows:

1. Mr. P.G. Kakodkar - Chairman

2. Mr. C.M. Maniar - Member

3. Mr. Joseph Massey - Member

14. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In view of the nature of activities which are being carried out on by the Company, Rules 2A and 2B of the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988, concerning conservation of energy, technology absorption and foreign exchange earnings outgo, respectively, are not applicable to the Company.

The Exchange does not directly contribute to export growth, as it is not allowed to export its services. However, MCX-SX provides a platform to the small and medium enterprises (SMEs) and resident Indians, who hitherto did not have easy access to the currency market and takes the necessary initiative to educate these potential users on the benefits and risks of trading in currency futures through seminars and events. By providing a hedging mechanism, it indirectly encourages exports.

There were no foreign exchange earnings during the period ended March 31, 2009. The foreign exchange outgo during the period ended March 31, 2009 cumulatively amounted to Rs. 6.95 lakhs.

15. PARTICULARS OF EMPLOYEES

Information in accordance with sub-section (2A) of Section 217 of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 and forming part of the Directors' Report for the period ended March 31, 2009, is given as an Annexure to this Report.

16. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors, based on the representations received from the Operating Management, confirm that:-

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. they have, in the selection of the accounting policies, consulted the Statutory Auditors and have applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the loss of the Company for that period; they have taken proper and sufficient care, to the best of their knowledge and ability, for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities;

iii. they have prepared the annual accounts on a going concern basis.

17. BUY-BACK OF SHARES

As during the last financial year, your Company did not have any scheme of buyback of shares, the requirements specified in section 217(2B) read with section 77A of the Companies Act, 1956 are not applicable to the Company.

18. EMPLOYEES STOCK OPTION PLAN

In order to attract, develop, retain and reward talented workforce, your Directors propose to institute a Employee Stock Option Plan (ESOP) Scheme, whereby employees of the Company including its executive and non-executive Directors and Directors and employees of any subsidiary of the Company would be granted options, which may be exercised on a later date to acquire the Company's shares at a pre-determined price. As a matter of best practice and good governance, the Company proposes to follow the SEBI (Employees Stock Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999, as amended and as applicable to a listed company. The Scheme would be administered by the Compensation Committee of the Board of Director, which consists of a majority of independent directors through a trust to be formed for the purpose. The proposal is placed for approval of shareholders at the first Annual General Meeting of the Company.

19. ACKNOWLEDGEMENTS

The Directors wish to convey their appreciation to all the Company's employees for their enormous personal efforts as well as their collective contribution which enabled the Company to meet the challenges set before it, including the fierce competition in the sector. The Directors would also like to place on record their gratitude for the valuable guidance and support received from the Government of India, Securities and Exchange Board of India, Reserve Bank of India, participating banks, clearing banks, NSDL, CDSL, FEDAI, FIMMDA, FIEO, various chambers of commerce, trade associations and all other broker-members, vendors and all other business associates for the continuous support given by them to the Company and their confidence in its Management.

On behalf of the Board of Directors

Joseph Massey

Managing Director & CEO

U. Venkataraman

CEO-CD Segment & Whole-time

Director

Mumbai, June 26, 2009

Find IFSC