National Spot Exchange Ltd.

National Spot Exchange Ltd. (NSEL) is the national-level, institutionalized, electronic, transparent spot trading platform for commodities. It is a structured market place, set-up to transform the commodity market by way of reducing the cost of intermediation and, thereby, improving marketing efficiency. Its state-of-the-art technology facilitates risk-free and hassle free purchase and sale of various commodities. NSEL provides others, customized solution to farmers, traders, processors, exporters, importers, arbitrageurs, investors and other stake holders, pertaining to commodity procurement, storage, marketing, warehouse receipt financing, etc. NSEL commenced Live trading on October 15, 2008. At present, NSEL is operational in 16 states in India, providing delivery-based spot trading in 50 commodities. In 2010, NSEL added a new dimension to commodity market by introducing investment products in commodities in demat form. For the first time in the history of Indian commodity market, NSEL launched a series of unique investment products, known as e-Series instruments. e-Gold, the first product under e-Series umbrella, was launched on March 17, 2010. e-Series products provide an opportunity to small investors to invest in physical commodities (e.g. Bullion) in smaller denomination in demat form. This segment is similar in functionality to the cash segment in Equities.

Mission To develop a pan-India, institutionalized, electronic, transparent common Indian market offering compulsory delivery-based spot contracts in various agricultural and non-agricultural commodities. With a view to reduce cost of intermediation by improving marketing efficiency and, thereby, improving producers realization coupled with reduction in consumer paid price. Objectives The main objective of NSEL is to develop a vibrant electronic spot market in various commodities and to offer a value proposition to different segments of the commodity ecosystem. The idea is to reduce cost of intermediation and create an electronic linkage between buyers and sellers across the country. The Exchange provides counterparty guarantee in terms of quantity, quality and payment. Hence, the participants get a safety net against credit risk and counterparty default. USPs OF NSEL Provides an effective method of spot price discovery in various commodities in a transparent manner Provides a market where farmers/producers/importers/Government companies can sell their commodities and realize proceeds at the best prevailing price in a risk-free manner Offers a market where the processors, end-users, exporters, corporate (both private and Government) and other upcountry traders can purchase commodities at the most competitive price without any counterparty and quality risk Provides investment instruments in commodities for retail investors and HNIs Offers a transparent market where financiers, investors and arbitrageurs can invest money in buying various commodities across the country without going through the physical market hassles Provides authentic spot price of various commodities that can be used by the futures market as the benchmark price for settlement of their contracts on the date of expiry Helps the futures exchanges, Forward Markets Commission (FMC) and the Government in achieving the target of compulsory delivery in all agricultural produce by way of creating a linkage between physical market and futures market Promotes grading and standardization of agricultural produce and facilitates warehouse receipt financing to farmers and traders by the financial institution Creates a market for trading in negotiable warehouse receipts, both in physical and electronic form

Regulatory Set Up NSEL commenced operation pursuant to the Gazette Notification dated June 5, 2007 issued by the Ministry of Consumer Affairs, Food and Public Distribution, Government of India, allowing it to conduct trading in one day duration forward contracts in commodities subject to conditions. Subsequently, the Ministry has issued Gazette Notification dated February 6, 2012 to appoint Forward Markets Commission (FMC) as the designated agency to which all information or returns relating to the trade as and when asked for shall be provided by the National Spot Exchange. In compliance with the conditions of the Gazette Notification, NSEL submits specified reports, returns and information to the Forward Markets Commission (FMC) on regular basis. Since marketing of notified agricultural produce is regulated by Directorate of Marketing of respective State Government, NSEL obtains licenses from State Governments under respective State APMC Acts, where it intends to launch Farmers Contracts for agricultural commodities. NSEL has hitherto obtained licenses from the following State Governments: Government of MAHARASHTRA The Director, Agricultural Marketing & Rural Finance, Government of Maharashtra, has granted license to NSEL as Private Market under the State APMC Act Government of KARNATAKA The Director of Agricultural Marketing, Government of Karnataka, has issued license to NSEL for establishment of Spot Exchange in the State of Karnataka under the State APMC Act Government of GUJARAT The Director of Agricultural Marketing & Rural Finance, Government of Gujarat, has granted license to National Spot Exchange as E-Market under the State APMC Act Government of MADHYA PRADESH (MP) The Managing Director, MP State Agricultural Marketing Board, Government of Madhya Pradesh, has granted license to NSEL for establishing electronic trading facilities in MP Government of ORISSA The Director, Agricultural Marketing, Government of Orissa, has granted license to NSEL as a Private Market under the State APMC Act

Government of RAJASTHAN The Director, Agriculture Marketing, Government of Rajasthan, has granted license to NSEL under the State APMC Act as a Private Sub E-Market

Major Achievements: Milestones & Strategic Alliances 2013 MAR Agreement with Hadher Group of establishments LLC, Abu Dhabi, UAE for Joint business development and marketing in commodities JUN NSEL and SBI have tie up for the collateral Management Services Coffee board of India signs pact with NSEL to create a Warehouse receipt based electronic Spot Marker for Coffee beans JUL Tamil Nadu Co-operative Marketing Federation (Tanfed ) entered into an agreement with NSEL to purchase potato, onion and ginger online 2012 FEB Received Shariah certification for e-Lead, e-Zinc and e-Nickel APR Launched e-Platinum under its investment product category e-Series SEP Western Ghats Agro Growers Ltd. (WGAGL), Joint initiative of Kerala farmersand NSEL was inaugurated by the Honorable Chief Guest Prof K. V. Thomas,Minister of State for Consumer Affairs, Food and Distribution in Kerala. NOV Signed an MoU with Belarusian Universal Commodity Exchange (BUCE), thelargest Commodity Spot Exchange in Republic of Belarus for developing bilateraldeals between India and Eastern European countries, especially Republic ofBelarus, Russia, Ukraine, Kazakhstan. NAFED appointed NSEL as a State Level Supporter (SLS) for the procurement of cotton and processing of cotton by ginning and pressing to convert into cotton bales for the season 2012-13 on its behalf. DEC National Spot Exchange Limited (NSEL) has signed an agreement with Small Farmers Agribusiness Consortium (SFAC) to provide the services of Technical and Logistic Supply Agency (TLSA) for the Pulses Procurement Programme under MSP (PPPMSP). 2011 JAN Signed an MoU with Govt. of Gujarat under Vibrant Gujarat 2011

FEB Received Shariah certification for e-Gold, e-Silver and e-Copper 2009 JAN Commenced cotton procurement in Andhra Pradesh under Price Support Scheme (PSS) operation on behalf of Nafed JUN Signed an MoU with the Maharashtra State Agriculture Marketing Board, to create linkage between rural Primary Agricultural Cooperative Societies (PACS) godowns and spot market facilities SEP Signed an MoU with Govt. of Orissa, for developing electronic market facilities in Orissa 2008 JAN Issuance of license by Govt. of Maharashtra MAY Issuance of license by Govt. of Karnataka for setting up spot exchange in the State of Karnataka JUN Signed an MoU with the Gujarat Agro-Industries Corporation Ltd. (GAIC) to create a strategic alliance for development of agri-business and providing an electronic market platform in the State 2007 MAY MoU with Govt. of Madhya Pradesh, for developing electronic market facilities in Madhya Pradesh JUN Recommendation by the Ministry of Agriculture, Govt. of India about NSEL project Issuance of Gazette Notification by the Ministry of Consumer Affairs, Govt. of India under Section 27 of the FCRA, 1952 OCT Issuance of license by the Govt. of Gujarat under Gujarat APMC Act NOV Signed an MoU with IL&FS for common service centers being setup under National EGovernance Project to be connected to NSEL project Signed an MoU with Govt. of Rajasthan 2005 MAY Incorporated as a company limited by shares under the Companies Act, 1956

Services Offered
Electronic spot trading facility in various commodities with specific delivery Centres Trading in Commodity-based Investment instruments in demat form Grading, quality certification and standardization of commodities Facilitating Collateral financing against warehouse receipts Customized services relating to storage, transportation, logistics and shipment Procurement services to Corporates and Government agencies Electronic auction of various commodities on behalf of FCI, MMTC, etc. Scientific storage of commodities with warehouse receipt financing

Benefits NSEL offers significant benefits to various stakeholders of the commodity ecosystem, such as farmers, traders and the Government among others. FARMER Enables seamless connect to the national market to ensure sale of marketable surplus Provides better price discovery and realization GOVERNMENT Enables better realization of cess as NSEL submits a statement of all physical deliveries to the authorities Enables Govt. companies to enhance price realization by conducting auction of commodities through NSEL platform Promotes agro-industrial processing and exports as uninterrupted supply of raw materials is assured through NSEL Enables creation of important trading hubs that generate direct and indirect employment All the aforementioned objectives are achieved without any significant cost to the exchequer TRADERS Provides a wider and liquid market, where huge quantities can be traded Eliminates counterparty risk, credit risk, and risk relating to rejection at buyers godown at the time of delivery Ensures elimination of post trade risks

Empowers farmers to quote desired selling price, which is not available in mandi auction system Enhances bargaining power due to availability of alternative marketing channel Promotes grading and standardization at farm gate, leading to grade and quality based price realization Increases holding capacity due to availability of warehouse receipt financing

Provides easy access to bank finance against warehouse receipts Provides a grading system for effectively using the futures market for managing their risks Offers opportunities to expand activities to multiple commodities with operational ease

Operations
Trading NSEL provides an online, screen-based trading system, which can be accessed through VSAT, leased line or internet. The Exchange conducts trade through daily expiry commodities contracts. The positions outstanding at end of the day result into compulsory delivery. However during the day, the transactions of offsetting nature are netted off and delivery is effected only with respect to the net quantity outstanding at end of the day. Terms relating to quality specifications, place of delivery, date of delivery and other conditions are specified by the Exchange in advance. All contracts executed on the system are based on such terms only. Market remains open from 10:00 am to 11:30 pm. Delivery, Clearing and Settlement All trades executed during the day are netted off at the close of market hours as per the weighted average price of the last 30 minutes. The profit/loss arising thereon is settled on the basis of Mark-To-Market (MTM) on either the same day or next day depending on the contract condition. The net sellers have to give delivery by way of depositing goods in the Exchange designated warehouses/storage tanks as specified in the Circular. The buyer's account is debited by the Exchange and delivery order is issued to him after ensuring that payment is complete. Thereafter, payout is credited to the seller's account. In case the seller/buyer fails to honor his delivery obligation, the position is auctioned/closed out at the risk and cost of the defaulting party. Risk Management, Margining and Surveillance The Exchange uses various tools for risk management, margining and surveillance to ensure market integrity. All positions outstanding in the market are subject to margin payable by both buyers and sellers. However, margin is not applicable on the sellers who have deposited goods in the Exchange-designated warehouses and pledged with the Exchange. Settlement Guarantee Fund The Exchange guarantees performance of all contracts executed on the Exchange platform. For this purpose, the Exchange maintains a settlement guarantee fund. Notwithstanding default of any member, payout is honored as per the Exchange schedule. Technology NSEL has the strategic advantage of having Financial Technologies (India) Ltd. (FTIL), as its technology partner for delivering technologically advanced solutions to market participants. FTIL has provided a robust technology platform to multiple domestic and international Exchanges. The Exchange uses a client server application, which can be accessed through VSAT, leased line, Internet as well as mobile phones. The hardware hosting the trading and surveillance applications are fully fault tolerant systems with zero redundancy.

Operational Flow chart regarding Use of NSEL platform by a Farmer

Product Summary
Exchange is providing an unbiased and state-of-art platform for buying and selling of commodities. Commodities traded on Exchange platform include agricultural commodities, bullions, and metals. Exchange has now launched investment products (E-Series) in commodities which are accumulated in the demat account of the investors. Main aim of the Exchange is to bring a large number of buyers and sellers on the same platform for spot price discovery and to make sure that the commodity bought and sold on the Exchange is delivered on time without the counter-party risks to the traders 1. Commodities are traded in contract form on the electronic trading terminal. 2. All contracts are of single day duration having different settlement cycle depending upon the commodity and market practices 3. The Exchange offers two types of contract (Farmers contract and traders contract) for agriculture commodity. Farmers contract is market cess unpaid and has smaller lot size to facilitate even a marginal farmer to sell their produce. Traders contract is market cess paid and usually has larger trading lot size. 4. A commodity may have multiple contracts based on the market location, settlement cycle, and lot size.

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Commodities Offered
NSEL provides a platform for trading in multiple commodities with multiple contracts. It also provides trading in such commodities, which are traded on futures exchanges. This has enabled seamless process of cash future arbitrage, enabling investors to buy Exchange-certified deliveries. Besides, there are some customized contracts to meet the specific requirements of an institutional buyer or institutional seller. It has also launched a number of farmers contracts to provide a service to the small and marginal farmers, where it does not charge transaction fee from small and marginal farmers. As on Dec 31, 2012, the Exchange offers trading in 50 commodities. Commodity Arecanut Bajra Barley Basmati Rice (or Rice) Basmati Paddy (or paddy) Black Pepper Cardamom (Oil type & Splits) Castor Seed Delivery Centres Shimoga, Channagiri (Karnataka) Jaipur (Rajasthan), HAFED Warehouse (Haryana) Jaipur, Chomu, Sikar, Srimadhopur (Rajasthan) Jakhal, Ratia, Raina - HAFED Warehouse (Haryana), Ludhiana (Punjab) Karnal, Nilokhari, Thanesar, Ladwa, Pehowa, Sirsa, Ismailabad - HAFED Warehouse (Haryana), Warangal (AP), Ludhiana, Khamanon (Punjab) Vandanmedu (Kerala), Saharanpur (Uttar Pradesh) Vandanmedu (Kerala) Palanpur, Kadi, Jagana, Mehsana, Patan, Chandisar, Visnagar, Panthawada, Gandhidham, Sidhpur, Dhenera, Deesa, Harij, Vadali, Mundra, Himmatnagar, Deodhar, Thara, Khedbrama, Vadgam (Gujarat) Kandla (Gujarat) Delhi, Bikaner, Jaipur, Sri Ganganagar, Malpura (Dist. Tonk) (Rajasthan), Ganj Basoda, Vidisha, Guna (Madhya Pradesh), Osmanabad, Jalgoan (Maharashtra), Gadag (Karnataka) Indore (Madhya Pradesh), Jalgaon (Maharashtra)

Castor Oil Chana/Desi Chana Chana Kantawala/Chan a Kabuli Coal Copra Coriander Copper Cotton (Bales & Kapas)

Mangalore (Karnataka) Tiptur, Arsikere & Tumkur (Karnataka) Guna (Madhya Pradesh) Demat (e-Copper), Delhi Mumbai, Yavatmal-Arni, Gunj, Darwha, Wani, Digras, Nagpur-Narkhed, Wani, Kalameshwar, Amravati-Achalpur, Chandur, Akola-Telhara, Murtijapur, Khamgaon, Dhule, Balapur, Barshi Takli, Jalgaon-Raver, Erandol, Dharangaon, Pahur, Parola, Amalner, Aurangabad-Sillod, Beed Georai, Sonpet, Parli, Ashti, Kaij, Buldana-Malkapur, Nandura, Deulgaon Raja, Hingoli-Aundha Nagnath, Jalna-Ambad, Jafrabad, Parbhani-Selu, Nanded-Bhokar, Dharmabad, Ardhapur, Wasim-Karanja, Nisik-Shirpur, Osmanabad, Nandurbar, Kolhapur, Solapur, Latur, Aurangabad-Vaijapur (Maharashtra), Himmatnagar, Rajkot (Gujarat), Adilabad, Nizamabad, Khammam (Andhra Pradesh)

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Cottonseed Wash Kadi, Tramba (Gujarat), Shamshabad (Hyd) (Andhra Pradesh) Oil Gold Ahmedabad, Rajkot (Gujarat), Mumbai (Maharashtra), Kolkata (West Bengal), Hyderabad, Vijayawada (Andhra Pradesh), Chennai, Coimbatore (Tamilnadu), Jaipur (Rajasthan), Delhi, Indore (Madhya Pradesh), Patna (Bihar), Bangalore (Karnataka) Groundnut Jaipur, Bikaner, Jodhpur (Rajasthan), Maliya Hatina (Gujarat) Guar Seed Bikaner, Jaipur (Rajasthan), Hissar, Sirsa, Adampur (Haryana), Deesa, Chandisar (Gujarat) Guar Gum Jodhpur (Rajasthan) Jeera (Cumin Jodhpur (Rajasthan) seed) Lead Demat (e-Lead) Tur (Lemon, Mumbai, Jalgoan (Maharashtra), Chennai (Tamilnadu), Ex-Godown Tandur, Malavi, Whole, (Andhra Pradesh) Split Redgram) Maize Maheshkhoont (Bihar), Jalgaon, Khopate near Uran (Maharashtra), Umerkote (Orissa), Davangiri (Karnataka), Kota (Rajasthan) Masoor/Lentil Kolkata (West Bengal), Mumbai (Maharashtra) Moong (Green Mumbai, Jalgoan (Maharashtra) Gram) Mustard Oil Jaipur (Rajasthan) Nickel Demat (e-Nickel) Pig Iron (iron Jajpur (Odisha) ore) Platinum Demat (e-Platinum), Ahmedabad, Jaipur, Delhi, Hyderabad, Mumbai Rajma (Kidney Ex-Godown (Andhra Pradesh) Bean) Red Chilly Saharanpur (Uttar Pradesh), Khammam (AP) RBD Palmolein Mundra, Kandla (Gujarat), Kakinada (AP) RM seed Jaipur, Jodhpur, Kota, Baran (Rajasthan), Narnaul, Rewari (Haryana) (Mustard seed) Silver Ahmedabad, Rajkot (Gujarat), Mumbai, Solapur, Kolhapur (Maharashtra), Kolkata (West Bengal), Hyderabad (Andhra Pradesh), Chennai (Tamilnadu), Jaipur (Rajasthan), New Delhi (Delhi), Demat (e-Silver) Soybean Ganj Basoda, Vidisha (Madhya Pradesh), Jalgoan, Nandurbar (Maharashtra), Kota, Pratapgarh, Baran (Rajasthan) Soybean DOC Kota (Rajasthan) Soybean Oil Kota (Rajasthan) (Crude) Soybean Oil Shamshabad (Hyd) (Andhra Pradesh) (Refine) Steel & Steel Raipur (Chhattishgarh), Jharsuguda (Orissa), Kurnool (AP), Mumbai TMT (Maharashtra) Sugar Kolhapur (Maharashta), Patna (Bihar), Kolkata (West Bengal), Ex-HAFED

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Sunflower Seed Sunflower Oil Urad (Black Mapte) FAQ Wheat Wool (Raw) Wool (top) Yellow Peas Zinc

SUGAR MILL ASSAND, Ambala (Haryana), Dadariya, Dist. Vapi (Gujarat), Jalgaon (Maharashra) Shamshabad (Hyd) (Andhra Pradesh) Mumbai, Jalgaon (Maharashtra) Rajkot (Gujarat), Jaipur, Chomu (Rajasthan), Delhi, Vidisha (Madhya Pradesh), Ex-Odisha, Jalgaon (Maharashtra) Ludhiana (Punjab) Ludhiana (Punjab) Mumbai (Maharashtra), Kolkata (West Bengal) Demat (e-Zinc), Delhi (Zinc Ingot)

E-Series
The Cash Segment of Commodities; Investment Products for Retail Investors For the first time in India, NSEL has introduced e-Series products in commodities for retail investors. These are investment products that enable investors to buy and sell commodities in demat form and hold them in their demat account. Retail investors now trade and invest in commodities like they do in equities. This is a unique market segment, which functions like the cash segment in equities, but offers commodities in the demat form in smaller denominations. The clearing and settlement, pay-in and pay-out mechanism is based on T+2 settlement cycle. E-Series products provide opportunity for intra-day trading, coupled with demat delivery in respect of positions outstanding at end of the day. NSEL has launched e-Gold, e-Silver, e-Copper, e-Zinc, e-Lead, e-Nickel and ePlatinum. NSEL will continue to add more commodities under this segment. Investors who wish to purchase e-Series products are required to open beneficiary accounts with NSEL-empanelled Depository Participants (DPs). National Securities Depository Ltd. (NSDL) and Central Depository Services (India) Ltd. (CDSL), are the depositories for holding commodity units in the electronic form. Industrial Products NSEL provides the facility to sell processed/manufactured industrial products on its platform. The producer company gets listing of its products on the NSEL platform through a formal agreement, specifying the rights and obligations. The primary objective of allowing branded products on the Exchange is to provide efficient marketability and mechanism to manage trading of the branded products. At present, Hindustan Zinc Ltd. sells silver bars mined and refined at its factory on the

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NSEL platform under such arrangement. Similarly, Neelachal Ispat Nigam Ltd. (NINL) Orissa sells Pig Iron produced in its mines, while MMTC sells branded gold coins on its platform. Advantages of selling industrial products on NSEL platform Accessible by large number of buyers spread across the country Good market depth since it reaches every corner of the country Cost-effective method of electronic marketing with complete end-to-end solutions relating to trading, delivery and settlement Transparent price discovery process Elimination of counterparty risk

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Membership
Membership of NSEL is available to individuals, partnership firms, corporate houses, HUFs, cooperative societies and other legal entities. Membership is granted to such entities, which comply with all requirements relating to admission fee, security deposit, annual subscription, qualification/experience and net worth criteria. Members can trade on their own account or on accounts of their clients. They can also appoint their sub-brokers, franchisees, authorized persons and remisiers. Members can also set up their branch offices and franchises. Members/brokers can charge brokerage or commission from their clients, as may be negotiated between them. Corporate houses, willing to use NSEL platform for procurement or sale of commodities, can either become a member directly or can trade through any of the members of the Exchange. Membership Categories Trading-Cum-Clearing Member (TCM) TCM is a person/corporate who is admitted by the Exchange as a member, conferring upon him a right to trade and clear through the Clearing House of the Exchange, as a Trading-Cum-Clearing Member. TCM can appoint sub-brokers, franchisees, authorized persons and remisiers, as well as set up their branch offices. Members can charge brokerage or commission from their clients, as may be negotiated between them. Trading Member (TM) TM is a person admitted by the Board who has the right to trade on his own account as well as on accounts of his clients, but has no right to clear and settle such trades himself. All such trading members must be affiliated with any one of the Institutional Trading-cum-Clearing Member (ITCM) or Professional Clearing Member (PCM), having clearing rights on the Exchange. Institutional Trading-Cum-Clearing Member (ITCM) ITCM is an institution/corporate which is admitted by the Exchange as a member, conferring upon it the right to trade and clear trades, as an Institutional Trading-Cum Clearing Member. Further, the ITCMs can also appoint sub-brokers, authorized persons, and Trading Members, who would be registered as Trading Members on NSEL at the request of the ITCM. ITCM can clear and settle trades on behalf of the sub-brokers, authorized persons and such Trading Members, who are registered on NSEL at their request, subject to the terms and conditions specified by NSEL. Professional Clearing Member (PCM) PCM is a Financial Institution, company or Bank admitted by the Exchange as a Professional Clearing Member, conferring upon it the right to clear and settle trades through the clearing house

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of the exchange, as a Professional Clearing Member. PCM is allowed to clear and settle trades of such members of the Exchange who choose to clear and settle their trades through such PCM. However, PCMs do not have trading rights.

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Market Timing Trading on the Commodities takes place on all days of the week (except Sundays and holidays declared by the Exchange - Trading Holidays & Clearing and Settlement Holidays-2013) The market timings for trading on the online platform of the Exchange are as under Products AGRI NON-AGRI Intraday Contracts (Agri / nonagri) E-Series Product Auction Contract Products Silver HAFED - Bajra, Basmati Paddy, Paddy and Rice Contracts NAFED- Rajma & Whole Toor Ball Copra Sugar Monday to Friday 16:00 to 16:40 12:00 to 15:00 12:00 to 15:00 12:00 to 15:00 10:00 to 11:50 and 18:00 to 19:30 Saturday 13:00 to 13:40 Monday to Friday 10.00 to 18.00 10:00 to 23:30 10:00 to 16:00 10:00 to 23:30 Saturday 10:00 to 14:00 10:00 to 14:00 -

FCI Wheat auction contracts for various Delhi FSDs traded from 10:00 AM to 11:50 AM on the Wednesdays as notify by FCI. Some other Contracts timings: Trade timing Commodity Symbol Monday to Friday Gold Medallion RBD Palmolein MMTCGL8DEL RBDGOKUL9 RBDGOKUL9 10:30 to 16:30 10:00 to 17:00 Saturday 10:00 to 14:00

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RBDGUJOIL9 Masoor Tur Malavi MASOORKOL5 TURMLWCHE5 10:00 to 19:00 10:00 to 19:00 10:00 to 20:00 10:00 to 14:00

Kapas (Raw Cotton) FKAPASMAH0

Board of Directors

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Mr. Shankarlal Guru - Chairman Mr. Jignesh Shah - Vice Chairman Vice Chairman - MCX, Founder of FTIL Mr. B D Pawar - Director Director - CITA Mr. Ramanathan Devarajan - Director Financial Technologies Group

Promoters
NSEL is promoted by Financial Technologies India Limited (FTIL) and National Agricultural Cooperative Marketing Federation of India Limited (NAFED). Financial Technologies (India) Ltd. (FTIL)

FTIL is the flagship company of the Financial Technology Group. FTIL is a global leader in creating and operating technology-centric, next generation financial markets that are transparent, efficient and liquid, across multi asset class, including equities, commodities, currencies, energy and bonds among others. It is a company listed on BSE and NSE. www.ftindia.com National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED)

NAFED is the national level farmers federation registered under Multi State Co-operative Societies Act. It was set up on 2nd October, 1958 to promote co operative marketing of agricultural produce to benefit the farmers. www.nafed-india.com

NSEL Collapse

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There was the Rs 250 crore Harshad Mehta scam built on fake bank receipts and now there is the Rs 5600 crore NSEL scam built on fake warehouse receipts and illegal trades. It's been almost 2 months since the National Spot Exchange started to unravel but we are still in government committee territory. Not only did the government allow an unregistered, unregulated exchange to function but it also ignored early signs of trouble. NSEL's former CEO says in his affidavit that the exchange faced payment issues way back in 2011-12. FSDC was alerted to this in 2012. FMC Chairman Ramesh Abhishek told this show that when it discovered the illegal trades last year the exchange turnover was at Rs 2000 crores. But nobody did nothing till mid this year when the turnover had jumped to Rs 6000 crores. An innocuous-looking notification from the Forward Markets Commission (FMC) came in on July 12, 2013. And in the offices of the National Spot Exchange Limited (NSEL), a commodities exchange promoted by the Jignesh Shah-led Financial Technologies (FinTech), things began to change. The notification restricted NSEL from making fresh contracts available as they were likely in contravention of the Forwards Contracts Regulation Act. NSEL first changed its contract duration to comply, and then when it found customers leaving in droves, threw up its arms and shut down the exchange. More than Rs 5,500 crore was due, and over the next few days it became evident that there was neither the money nor the underlying spot goods to settle trades by over 15,000 investors. Since then, the story has unravelled, slowly. The scale of this default dwarfs the last big exchange crisis, the Rs 600 crore settlement problem at the Calcutta Stock Exchange in 2001. What is a Spot Exchange? Commodity spot trading is about buying and selling a commodity, paying cash for and receiving your goods on the spot. Which signifies that the buyer and seller agree on a price and deliver their side of the contract immediately. NSEL was a spot exchange designed to help this activity, with the added feature of being electronic (so buyers and sellers can be in different locations) and anonymous (the buyer and seller dont know who the other side is). The important feature of any such exchange is that the exchange has to stand guarantee to either party that it will ensure the contract is settled. If the buyer cant bring in the money for any reason, the exchange should then sell the goods to someone else and recover the money (and make up the difference). And a similar exercise if the seller defaults.

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Now, when the seller and buyer are far away from each other, how does the exchange guarantee delivery? The idea is that the seller must come to an exchange-designated warehouse and give his goods, which are then tested and verified for quality and weight. He then gets a warehouse receipt (WR) that is used for electronic trading. When he sells on the exchange, the warehouse receipt is transferred to the buyer; this receipt entitles the buyer to take the goods out of the warehouse, or if he chooses, to retain the goods there (to sell them later) by paying the warehouse rental charges. There are rules governing commodity trading, which is regulated firmly by the Forward Market Commission (FMC). Under the Forward Contracts Regulation Act, any contract that is called spot must be settled within 11 days that is, both delivery of goods and transfer of money must happen within 11 days (called T+11). The 11 days give the buyer and seller time to complete the contract. Thus, this would then not become a forward contract. Spot contracts, by their nature, were deemed to be out of FMC regulation by a small notification in 2007 by the Department of Consumer Affairs. This exemption was given specifically for one-day duration contracts or, technically those contracts that complete both delivery of goods and transfer of money within two days, called T+2. What NSEL Really Did Instead of just making T+2 contracts, the spot exchange designed multiple contracts. Some of them were T+2 settled, making them spot in nature. Others were the same product but settled after 25 to 35 days, called T+25, or T+36 contracts. This was illegal such contracts are forward contracts and NSEL was not authorized to execute these, but it did. And no one stopped it. And the concept got worse. NSEL sold what seemed to be arbitrage. You could buy the T+2 contract and sell the T+25 contract and the difference in prices gave you nearly 15 per cent per year, annualized. Effectively, you would be the owner of half a ton of sugar or castor seeds or such commodities, for a period of about a month, which would get sold when you exited. The exchange practically removed all constraints from investors during this period the goods would lie in the same warehouse and be sold from there, and the price difference included a 15 percent net return after storage charges, VAT, etc. This arbitrage was almost guaranteed. NSEL as an exchange stood guarantee, or so investors thought. Brokers peddled this product to their customers for over two years. The number of customers ballooned to over 15,000, each of whom put in at least Rs 2 lakh to get their superior returns. What Was the Problem? Who was on the other side? Thats the question that no one seems to be asking.

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Was the arbitrage genuine? It appears not. The contracts were always sold in pairs. Brokers have reported that no one was allowed by the exchange to just take one side of any contract you always had to have a buy on the near contract and a sell on the far side. A quick look at the Kadi contract for castor seeds, sold in pairs of T+3 and T+36, shows identical volumes and interest for both contracts in January 2013, and thats the case with every commodity that had a near and far contract. This is hardly possible in a real market, so it points to the fact that these contracts were always executed in pairs. The Ponzi Scheme It turns out now that those on the other side were just 24 members of the exchange, called Planters or Processors or Borrowers. These members owned plants that processed commodities or, at least, they said they did. For instance, NK Proteins owned a plant to process castor seeds in Kadi, Gujarat. The contract the Kadi Castor Seeds contract was settled at an NSEL warehouse located inside the Kadi plant of NK Proteins. Processors like NK Proteins (and there were 23 other such members) were on the other side of the trade. They would sell at T+2 and buy back at T+23, offering huge returns. The fact that the contracts were executed in pairs indicates a financing program. Something is placed as collateral to borrow money for a short period of time. This used to be commonly known as badla financing in the pre-2000 stock exchanges, where shares were collateral. (Badla is banned now; the financing has moved to the futures market.) Lets say I am a plant owner, and I cant get a loan from a bank. I can effectively borrow from you at 15-18 percent much cheaper than I can borrow from banks. And if Im smart, I know that the goods I sell you will remain at a warehouse inside my premises, so why not cheat a little and tell you that yes, Ive added more goods to your warehouse, and you, on the other end of the phone agree. In this situation I can invent stock that doesnt exist and borrow against it for 15 days; for the interest, I might pay some out, but immediately get it back in a new contract when I add even more imaginary stock. This was the Ponzi nature of the game. Indeed, it turned out that some of these companies had poor balance sheets incapable of handling such large loans loans of the size of Rs 900 crore. And the exchange did nothing. Most investors rolled over their contracts. That is, when the contract was unwound after T+35, they would enter a fresh round of T+2 (buy) and T+35 (Sell). Meaning, the interest received was also ploughed back into further purchases; a borrower, on the other hand, was pretending to pay interest, but was simply creating warehouse receipts for the interest and trading them on the exchange, while rolling over the contract forever. The End of the Game

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All this had to stop sometime, and the circular from FMC stopped it. First, on 16th July the contracts were cut to T+10. But that would involve too many pair trades from one a month to three a month, each of which had higher transaction costs. Next, some investors smelt a rat and didnt roll over their contracts. The lack of a rollover shuttered the exchange. When the borrowers were told that they had to pay back all the money, they simply could not (or didnt want to). And it turns out they dont seem to have the goods to back it up either. On July 31, NSEL issued a circular saying all future contracts would be stopped. And because there was a settlement problem, they would have to delay payouts for a while. Remember, some investors had bought goods on a T+2 contract, paying upfront. Now they expected that after their 25-35 days, the other contract would kick in and they would be paid back money at the higher rate on that contract. At this point, the exchange should have stood guarantee. Thats the role of an exchange. But because it didnt get paid from the borrowers, it didnt have the capacity to pay. Lies, Deceit and an Incestuous Web The exchange started to lie. The CEO, Anjani Sinha said on August 1st that they had a Settlement Guarantee Fund of over Rs 800 crore plus they had all the stocks in the NSEL warehouses. In a few days they changed that position, stating they had only Rs 60 crore in cash and the rest of the guarantee fund was in stock. All entities were supposed to put a tiny amount up to 5 percent as margin until trade completion. This, too, was unavailable for some reason. And then, after telling everyone that they would get their money back, the NSEL management said they had to auction stock to get the money. Soon, even that avenue was gone as there wasnt any stock. Jignesh Shah, the founder of FinTech, which promoted the exchange, said in a press conference that they would have a high-powered committee, including an ex-SEBI chief, a senior police officer and the like, to ensure settlements happen. As it turns out, the committee was useless in actually enforcing the contracts. NSEL next created a complex settlement program. After a few days, NSEL management offered a settlement calendar stretching 30 weeks where people would be paid back Rs 174 crore per week for 20 weeks, Rs 86 crore a week after that, and a big balloon payment at the end. NSEL couldnt even make the first weeks payments properly it paid up just half. In the second week, to fend off investor aggression, FinTech dipped into its resources and paid Rs 177 crore to those with less than Rs 10 lakh outstanding. There have been three payments till now of Rs 92

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crore, Rs 190 crore (including small investor payouts) and then, this week on Tuesday, 3rd September, Rs 15 crore. But in the settlement program, NSEL had promised to pay Rs 174 crore on each of these three Tuesdays. In the middle of all of this, it turned out that many of NSELs 24 Processor members were related to each other. One of the biggest borrowers, NK Proteins, is owned by the son-in-law of NSELs chairman Shankarlal Guru. Then there was Indian Bullion Market Association, owned primarily by NSEL, which participated as a member, allowing parties in the bullion space to buy through them. The whole thing began to stink. N Sundaresha Subramanian of Business Standard visited many of the defaulting members and found strange results. There was a mall in the place where 2 lakh tons of sugar was supposed to have been stored, at the address of a NSEL borrower called Mangla Shree Properties. In Ludhiana, where ARK Imports was supposed to have 12,000 tons of raw wool, there was apparently nothing. One borrower had vacated its premises months back, while another refused to admit they owed anything. NSELs investors involved clients from nearly every major broker in the country. Even the Sahara Group, which is under RBI and SEBI fire, was found to have invested more than Rs 200 crore. Some NSEL board members were close to political bigwigs like Union Agriculture Minister Sharad Pawar. CEO Anjani Sinha had earlier in his career overseen defaults in two exchanges in Magadh and Ahmedabad. Belling this cat will not be an easy task. Where are the Regulators? The FMC was supposed to control regulation of all forward contracts. Although NSEL had received an exemption, it was only for the T+2 contracts and definitely not the T+35 contracts. The new FMC Chief, Ramesh Abhishek followed this up since 2012, but what about those before him? The Department of Consumer Affairs was the de facto regulator when no one else was. It had been made aware of the situation over a year ago and should have taken action, and it didnt. Even after the scam was unearthed, and the scale of the borrowing discovered, regulators remain tight-lipped about action. SEBI has barred some of the 24 borrowers from trading on the stock exchange, and FMC has ring-fenced MCX (a commodities futures exchange which shares the same promoter, FinTech, with NSEL) from helping the beleaguered NSEL with its cash. However, any other actions have yet to come through. Where is the RBI? Banks have lent to operations that involve stocks in warehouses. In fact, some photos of NSEL warehouses explicitly state that goods are pledged to certain banks. Are these goods there? Has the RBI asked banks to initiate a probe? Not yet.

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If FinTech is the promoter of NSEL, and NSEL has seen a huge default, the obvious next step is to declare that FinTech is not fit and proper to run any other exchange, including MCX. This has not yet happened. Given this is a huge fraud, it remains astounding that agencies like the CBI, the Economic Offenses Wing or others have not been brought in to investigate. The failure of regulation could be because there are too many agencies involved. Were Brokers to Blame? Brokers might have known something was wrong. After all, you dont get an exchange everyday where you have to coordinate between a buy and a sell on the phone. Many, though, fell prey to the machinations themselves. They promised investors a return of, say, 12 percent, and then took that money to NSEL and decided to make the 3 percent extra that NSEL promised. Now, when NSEL has defaulted, brokers want to put the blame on the exchange but just like the exchange, they promised the money, which they have to pay. SEBI must act and ensure these brokers pay. Also, brokers are expected to be fiduciary agents of their customers should they have exercised more caution before recommending such an investment? Where is the Money? The short answer is: we dont know. The Enforcement Directorate and a Mumbai Police Special Investigations Team (SIT) are trying to find the money. Its gone abroad through hawala, says the SIT. Others claim it has gone to fund real estate, where there is no swift liquidity. Yet others claim the money was used to prop up FinTech and MCX shares in the stock market so when those stocks fall, the amount of money that can be recovered reduces. It is also believed the money was siphoned for political interests or for personal gains of the personalities involved. Jignesh Shah, the ambitious promoter of FinTech, started out as an engineer on the BOLT system for the Bombay Stock Exchange in 1989. After learning the ropes, he set up FinTech in 1995 and established a presence in brokerage back-office and terminal software across India. Then he set up MCX and a slew of other exchanges in India and abroad. Shah won a battle against SEBI in 2012 about a circumvention of regulation in their new MCX-SX stock exchange. He had aggressively taken away market share from other exchanges. He had sued people who wrote against him and kept media as a friend with a big advertising budget. NSELs

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exemption from the Department of Consumer Affairs was attributed to Shahs influence. But it is now apparent that everything is not clean in the FinTech empire. It would be a surprise if someone with Shahs business sense let all this happen without knowing where the money has gone. What Happens to MCX and FinTech? FinTech, at Rs 111 per share, is down over 70 percent from its 31st July price of Rs 540. It derived a large portion of its profits from NSEL the trades resulted in outsized earnings through exchange fees. But the sudden lack of profit is not its only problem. If it is declared unfit to run exchanges and it has about nine of them that would destroy the enterprise. Apart from this, there are potential fraud charges if more dirt is discovered. MCX is a well-regulated commodities futures exchange. The volumes in it havent come down quite as much as one would suppose. Its share price fell 60 percent after NSELs shutdown announcement on July 31 but has now recovered to a mere 40 percent fall. The expectation is that regardless of what happens to its promoter FinTech, MCX will be sold and there are willing buyers. The Future? The NSEL crisis shows the investment community one thing: we do not have adequate regulation or enforcement. That if there is a crisis, the agreement will not be sacrosanct; it will be secondary to the interests of the parties who have better political and business connections. This default will trigger other issues, and in a country already branded as crony capitalist, the lack of will to enforce laws and put people in jail for fraud will hamper future investment. Decisive action is required, but the window for action is fast shrinking. There is a political fallout to this crisis, but the details on that are sketchy at best. The problem really is: we have lost trust. The entire financial system is based on trust for example, if everyone tried to withdraw his or her bank deposits at once, wed have to shut everything down. Every attempt to undermine this trust must be dealt with heavily. NSELs getting away will leave us all with a deficit worse than a fiscal or current account one: the Deficit of Trust.

'Wrongdoers' removed, steps being taken, NSEL assures HC National Spot Exchange Limited (NSEL) today assured the Bombay High Court that it was taking steps to protect investors' interests, and an oversight committee had been appointed to look into the alleged Rs 5,500 crore scam.

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It also said that "wrongdoers" had been now removed from its management. The division bench of Chief Justice Mohit Shah and Justice M S Sanklecha was hearing a petition filed by Indian Council of Investors seeking direction to NSEL that it should safeguard the rights of the investors after the bourse plunged into a crisis in July this year. The PIL also seeks that commodity market regulator Forward Market Commission and other authorities should take immediate custody and control of commodities stated to be lying in the warehouses. Senior counsel Janak Dwarkadas, appearing for NSEL, today told the court that it had taken some steps. "The previous employees who were responsible for the scam have been removed. A fresh management has been appointed. An oversight committee comprising a former judge and former Maharashtra Director Generalof Police D Sivanandan has been appointed," he said. "It is not that the NSEL is not doing anything. The wrongdoers are not in control anymore. Six complaints against the errant employees and borrowers have been lodged with the city police's Economic Offences Wing," he said. Dwarkadas added that so far Rs 850 crore of the guarantee fund had been used to pay back the investors' dues. The bench directed NSEL, government and other respondents to file affidavits-in-reply within four weeks. Judges also said that if any bail/ anticipatory bail petitions were filed by the accused in the case, the present bench would hear them. NSEL, promoted by Jignesh Shah-led Financial Technologies (India) Ltd, is facing the problem of settling dues of Rs 5,500 crore of 148 members/brokers, representing thousands of investor-clients, after it suspended trading on July 31 on the government's direction. NSEL's settlement guarantee fund stood at only Rs 85 lakh National Spot Exchange Ltds latest annual report, published in the bourses website for the first time since the crisis broke out a month ago, shows the exchange had set aside only a fraction of the amount it claimed to have had as Settlement Guarantee Fund. Against varying claims its SGF ranged from Rs 839 crore (Rs 8.39 billion) to Rs 62 crore (Rs 620 million), between July 29 and August 14, the bourse had Rs 84.66 lakh (Rs 8.46 million) in the actual SGF. In its annual report, the exchange termed it security guarantee fund, and it appeared under the head reserves and surplus.

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SGF is a separate fund maintained by exchanges, in addition to the margins they collect. This fund has to be created out of the exchanges own profits, to enable settlements in case of default. From NSELs annual report, it is clear the exchange first tried to project the margins it collected from investors as the SGF but later changed the practice and set aside a portion of its reserves. This real SGF was miniscule compared to the unsettled amount -- about Rs 5,600 crore (Rs 56 billion). According to note 35 in the annual report for 2012-13, the bourse said, Various state APMCs (agricultural produce marketing committees), while issuing a licence for establishing an emarket/private market spot exchange, have laid down to maintain a settlement guarantee fund to meet exchange obligations, but have not given any guideline for the constitution of the SGF. In view of such a requirement, an amount of Rs 64,66,448 had been apportioned out of the initial margins of the members to SGF NC and shown under current liabilities in financial year 2011-12. However, in 2012-13, it changed the practice. The report added, In the current year, the said amount has been transferred back to initial margins from members accounts and an appropriation of an equal amount has been done, out of the opening balance of reserves and surplus of the company. The company has appropriated for a security guarantee fund an additional amount of Rs 20,00,000 for financial year 2012-13. Elsewhere, in the annual report, the bourse said it had a settlement fund of Rs 706 crore (Rs 7.06 billion). As of March 31 2013, the company has maintained a settlement fund amounting to Rs 70,69,044,892 (previous year Rs 36,06,046,920). The fund comprises of total of initial margin, fixed deposits and bank guarantees collected from the members, the annual report said. This, however, isnt the same as an SGF in the spirit of the term, as it already had positions built on it and could not be used to fill in case of a default. This was exposed when the exchange was unable to make good payment defaults by borrowers for the second consecutive week.

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The magic behind the shrinking fund NSEL claimed to have Settlement Guarantee Fund of Rs 839 crore (Rs 8.39 billion) as of July 29 It gave varying figures during first two weeks of August confusing regulators, investors Annual Report shows actual settlement guarantee fund was just Rs 84.66 lakh (Rs 8.46 million) as of March 31 NSEL had Settlement fund of Rs 706 crore (Rs 7.06 billion) comprising margins paid in by investors But this is not same as Settlement guarantee fund, which has to be set aside from exchange's profits/reserves

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NSEL submits Rs. 5,600 crore settlement plan, FMC to take final call
Crisis-ridden National Spot Exchange Ltd (NSEL) on Wednesday submitted a seven-month plan with regulator Forward Markets Commission (FMC) for settling dues worth Rs. 5,600 crore to investors. The regulator said it will take a decision on the settlement plan after getting views from brokers and investors while directing NSEL not to make payments to related-entity Indian Bullion Market Association (IBMA) without prior approval. As per NSEL, the settlement process could start from August 16 and run till March 11, next year. Earlier, the exchange had said it would settle the payments to over 13,000 investors over the next five months. FMC has been empowered to oversee the settlement process. "Today, we have finalised the detailed settlement plan... Starting this Friday, August 16th, there will be pay-in every Friday and pay-out every subsequent Tuesday," Anjani Sinha, managing director and CEO of NSEL, said in a statement. As per the plan, Rs. 3,494.4 crore would be settled this year in weekly instalments of Rs. 174.02 crore. Another Rs. 860 crore will be paid in ten weekly instalments of Rs. 86.02 crore each during January-March quarter next year. During this period, NSEL said some members would settle their dues worth nearly Rs. 1,220 crore through sale of commodities, fixed assets and land among others. There are 24 buyers required to complete funds pay-in obligation to ensure smooth settlement, Sinha said, adding the focus should be on these buyers/processors for realisation of pending dues. "FMC has asked NSEL to share their settlement plan through their website and get feedback of investors and brokers. FMC will take a view after receiving their feedback." "We have asked NSEL for certain information on IBMA which is their related entity and not to make any disbursement to them without our approval," Forward Markets Commission (FMC) chairman Ramesh Abhishek told PTI. NSEL is engulfed in a crisis after the national spot commodity bourse suspended trade on all its contracts, raising concern over the possible defaults of Rs. 5,600 crore dues to about 13,000 investors.

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According to the NSEL, 21 entities owe nearly Rs. 5,600 crore to investors, with the maximum liability of Rs. 929 crore from N K Proteins. NSEL forms settlement panel The National Spot Exchange Ltd (NSEL), which faces a risk of default after suspending trade, today said it has formed an independent committee to advise and monitor settlement of trade amounting to about Rs 5,500 crore. NSEL will come out with the settlement plan by August 14, Jignesh Shah, Chairman and Managing Director of Financial Technologies India Ltd (FTIL), one of the promoters of NSEL, told reporters here. The exchange has been in a crisis after it suspended trade in most contracts on July 31. The decision to set up the committee was taken after a joint meeting of the regulator Forward Markets Commission (FMC) and NSEL with investors yesterday. "NSEL constituted an independent committee of eminent persons for the purpose of advising and monitoring the progress of financial close-out plan," the exchange said in a statement. Members of the committee include former Company Law Board Chairman Sharad Upasani, former Bombay High Court judge R J Kochar, former Sebi and LIC Chairman G N Bajpai, and D Sivanandan, former Director General of Police in Maharashtra. NSEL said the exchange will collate the payment plan from buyers and finalise pay-in and pay-out in consultation with the FMC and then announce it to the market. Yesterday, the exchange said eight entities are willing to pay about Rs 2,181 crore as per the scheduled due date or earlier. Another 13 entities have offered to pay about Rs 3,107 crore in weekly installments, while negotiations are on with three others for payment of Rs 311 crore. FMC okays NSEL settlement plan; questions accounts credibility Commodity markets regulator FMC has asked crisis-ridden NSEL to go ahead for the time being with its plan to settle Rs 5,600 crore of dues to investors and questioned the credibility of the accounts and information provided by the exchange. On August 14, the National Spot Exchange (NSEL) had submitted the plan to the Forward Markets Commission (FMC) to clear dues to 13,000 investors over a period of seven months.

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Noting that the NSEL's settlement plan does not inspire confidence, the FMC asked the exchange "to go ahead with your settlement plan for time being as the payouts are already seriously delayed, which is causing deep anxiety and resentment among the sellers." The FMC came down heavily on the NSEL for not taking guarantees for the financial settlement and providing different sets of information at different times. "The credibility of information given and the books of account/records maintained by NSEL have raised serious doubt on its authenticity. You (NSEL), are therefore directed to appoint a forensic auditor firm to establish the credibility of books of account, record maintenance by the exchange in next seven days," the regulator said in a letter to the NSEL. The FMC directed the exchange to appoint the auditor with its consent. The NSEL has also been asked to update the amount deposited in the escrow account on a daily basis to the regulator and on its official website. While the exchange is required to guarantee the settlement of all financial obligations, the NSEL mentioned in its settlement plan that the dues would be cleared subject to realisation of funds from payers. To this, the FMC said, "As such, exchange appeared to have disowned its responsibility of guaranteeing the financial settlement. Whereas the exchange has the sole responsibility of settlement of trade on the exchange...It cannot simply depend upon the realisation of pay-in obligation from buyers." The NSEL, promoted by Jignesh Shah-headed Financial Technologies India Ltd (FTIL), was engulfed in a crisis after its suspended trade on July 31, raising concerns about possible default of Rs 5,600 crore due to investors, including 7,000 small investors.

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NSEL Payments Defaults

NSELs first settlement default Commodity bourse National Spot Exchange (NSEL), promoted by Financial Technologies, defaulted in its very first part settlement to its clients on Tuesday, bringing true their worst fears. The commodity exchange, which had last week given a detailed schedule to pay Rs5,574 crore in 30 weeks through part payouts, managed to collect only half of the amount planned for the first week from 15 members. As against a payout obligation of Rs174.72 crore, it received Rs92.13 crore. The exchange could not recover anything from nine members. These include top defaulting members such as NK Proteins, Ark Imports, Yathuri Associates and Tavishi Enterprises, which owe Rs967.15 crore, Rs719.42 crore, Rs424.64 crore and 333.01 crore, respectively. The failure to meet the very first payout means the exchange may take longer than the seven months it has sought to complete the entire settlement, unless the government intervenes earlier. The exchange will pay the Rs92.13 crore to 148 clients in proportion of their dues. Indian Bullion Market Association, Anand Rathi Commodities, India Infoline Commodities and Geojit Comtrade, which have large amounts of money stuck with the exchange, will receive Rs19.17 crore, Rs10.50 crore, Rs5.34 crore and Rs51.3 crore, respectively. Meanwhile, in order to save its face, the beleaguered exchange sacked Anjani Sinha, the MD and CEO, and other six heads of department. The board decided that the current key management team headed by Anjani Sinha, MD & CEO, and other relevant heads of departments be removed from their current assignments, pending an enquiry. Anjani Sinha will cease to be the MD & CEO of NSEL with effect from August 20 and will be a special officer assisting in recovery process, said an NSEL release. The move comes after the Forward Markets Commission made known its displeasure over the way things were being handled at NSEL. Despite several directives by the Commission, NSEL had given different information on different occasions, even just one day prior to the first Scheduled pay out date. This casts serious doubt on the reliability of the figures submitted by the NSEL and also raises doubt on the seriousness of the

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Management and Board of the NSEL regarding settlement of the outstanding obligations, FMC had said in a release on Monday. Sensing trouble, market participants heavily dumped the stock of Financial Technologies, which closed at Rs141.30 its lowest since November 2004. The NSEL board has appointed P R Ramesh, a former Sebi official with over 20 years in legal practice, as the officer on special duty (OSD) to exercise all powers of a CEO of the company and report directly to the board. NSEL said it is also conducting a special investigation under the OSD to identify various lapses that may have been caused in the operation of the exchange and to suggest corrective and consequential actions for recovery of outstanding dues. Two days after the Forward Markets Commission (FMC) directed the National Spot Exchange Ltd. (NSEL) to take punitive action against those who have defaulted payment for claim settlement, the exchange declared nine members as defaulters. They are: ARK Imports Pvt Ltd., Loil Overseas Foods Ltd., Lotus Refineries Pvt Ltd., N K Proteins Ltd., NCS Sugars Ltd., Spin Cot Textiles Pvt Ltd., Tavishi Enterprises Pvt Ltd., Vimladevi Agrotech Ltd. and Yathuri Associates. These members (buyers) have been declared as defaulters as per the rules of the exchange, NSEL said in a circular. These members had failed to meet their financial commitment for the first settlement dated August 20, 2013. As per the settlement plans finalized by NSEL, investors were to get Rs. 174 crore every week from the buyers till clearance of the total dues amounting to Rs. 5,600 crore. However, for the first settlement, the exchange could mop up only Rs. 92 crore which has been distributed among investors. On August 21, the FMC had asked NSEL to auction the commodities lying as collateral in the warehouses to recover dues from defaulting members. The exchange was asked to proceed to liquidate all realizable assets of the defaulters .

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NSEL defaults in 2nd payout; takes loan to pay small investors As it defaulted for the second consecutive week in paying its investors, crisis-ridden National Spot Exchange (NSEL) today said it has received over Rs 177 crore from its main promoter, Jignesh Shah-run FTIL, which will be used to clear payments due to small investors. NSEL today defaulted for the second consecutive time in meeting its weekly payment obligation of Rs 174 crore. Payout today was about Rs 12.60 crore as against Rs 174 crore due. As per the schedule drawn, the exchange was to pay investors every week for 20 weeks beginning August 20. Forward Marketing Commission (FMC) Chairman Ramesh Abhishek did not say what action it will take against NSEL but said the FTIL funding to NSEL was outside the the payment schedule. Together with Rs 12.60 crore in borrowers had deposited in the escrow account, NSEL has Rs 190 crore for payments to 7,000 investors. NSEL in a statement said it will pay 100 per cent amount to 608 investors who were to receive amounts up to Rs 2 lakh as on July 31 this year. These investors will receive the remaining amount proportionately as per the settlement plan, it added. The announcement has came on the second day of the pay-out when exchange is supposed to pay Rs 174.02 crore. The beleaguered bourse has availed a bridge loan from its promoter Financial Technologies (India) Ltd (FTIL) for this disbursement. "NSEL has availed a bridge loan from FTIl, the promoter company to make these payments aggregating Rs 177.23 crore," the statement added. Meanwhile, the NSEL will also make a pay-out of Rs 12.60 crore under the settlement plan, through the escrow account, out of the money recovered from the members with outstanding dues. The exchange added that it has appointed Grant Thornton appointed as the forensic auditors who have commenced the audit today. "NSEL is actively pursuing recovery of the dues from the members with outstanding dues. This includes initiation of civil and criminal proceedings against the defaulting members besides taking actions under the Rules and Bye-laws of the NSEL," the statement added.

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NSEL DEFAULTS ON 3RD PAYOUT National Spot Exchange Ltd (NSEL) on 3 September, 2013 has again defaulted for the third time to meet their obligations in the payment of Rs. 174.72 crore to investors as only Rs. 15.37 crore could be paid. NSEL in its settlement plan submitted to the Forward Markets Commission (FMC) had committed to pay out Rs. 174 crore to investors. Out of which NSEL has already defaulted in the first two payouts as in the first payout it received only Rs. 92.73 crore from members and in second payout it received only Rs. 12.05 crore. Further, notices have been issued to 14 defaulters for bouncing of cheques for settlement. Out of 24 members, only five members have paid in Rs. 15.37 crore and the remaining 19 members has been declared defaulters. As per NSEL notice, the recovery from these defaulting members would be done by selling commodities lying in the warehouses, sale of assets offered by these members or by payments made by the defaulting members through their own resources. As per the exchange, the payments from the defaulting members would depend on actual receipts of payments based on the above process and not in a predefined schedule. NSEL has an obligation of Rs.5,700 crore dues settle, with 148 members and brokers who represent 13,000 investors. The exchange has to settle the entire amount to investors by paying Rs. 174.72 crore every week in seven months time. NSEL defaults for 4th time National Spot Exchange Ltd (NSEL) defaulted for the fourth consecutive week as it could pay only Rs 7.77 crore on Tuesday to investors out of scheduled Rs 174.72 crore. Crisis-ridden NSEL had defaulted in payments on three previous occasions as well. "The commodities which are lying in warehouses under the control of NSEL are being auctioned after calling for sealed bids. So far, Rs 7.77 crore has been realised and pay-out is being made of these proceeds on Sept 10, 2013. Auction of other stocks are in process," NSEL said in a statement. With today's pay-out, NSEL has been able to settle only Rs 128 crore out of Rs 5,500 crore outstanding to the 13,000 investors. The exchange had availed a bridge loan of Rs 177.23 crore from its promoter Financial Technologies (FTIL) to make payments on priority basis to small investors. NSEL was engulfed in a crisis when it stopped trading on all contracts on July 31 following government directives. It raised concerns about the possible default of Rs 5,500 crore to investors. Later, NSEL announced a seven-month plan to settle the dues to investors.

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NSEL said it is actively pursuing recovery of outstanding dues from the members with pay-in obligation. "This includes initiation of civil and criminal proceedings against defaulting members besides taking actions under the Rules and Bye-laws of the Exchange. So far, 19 members have been declared defaulters and legal proceedings have commenced under the Rules and Bye-laws," NSEL said. While 13 defaulters out of the 19 have met the exchange officials during the last two weeks, six are yet to meet the officials, NSEL said. Legal notices against 14 defaulters have been issued under Section 138 of Negotiable Instruments (NI) Act for bouncing of cheques for settlement. "So far, 5 defaulters have minuted their commitment to provide their properties as collateral for disposing of the same. The outstanding liability of these 5 defaulters stands at Rs 1,328.48 and the collateral offered is Rs 1,458 crore as per the defaulters, however, it is subject to due diligence and valuation," NSEL said. . NSEL added that Chartered Accountant firm Sharp and Tannan Associates, have confirmed that payouts have been made by NSEL to the bank accounts of the defaulting members. "The liability is confirmed by the CA firm at Rs 5,574.25 crore as on August 12, 2013. Sharp and Tannan have also conducted physical audit of gold, silver, platinum and base metals in respect of e-series contracts and have found the physical to be in order with the outstanding e-series units," the statement added. NSEL has appointed Grant Thornton as forensic auditors and, additionally, internal investigation has also been initiated against the management team of the exchange. The exchange has also appointed SGS to assay the quantity and quality of goods lying in various warehouses of the defaulters. According to the audit done by the agency, significant stock shortage has been found in the nine warehouses relating to 7 defaulters, however in 29 warehouses relating to 11 defaulters, the SGS audit team was not allowed inside the premises, it added.

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NSEL defaults for fifth time The National Spot Exchange Ltd (NSEL) today made the fifth straight payment default, as it could pay only Rs. 8.57 crore to investors out of the scheduled amount of Rs. 174.72 crore. Crisis-ridden NSEL had defaulted in payments on four previous occasions as well. With today's pay-out, NSEL has been able to settle just about Rs. 137 crore out of Rs. 5,500 crore outstanding to the 13,000 investors. "The total amount being disbursed today is Rs. 8,57,88,539," NSEL said in a statement. Members of the exchange are advised to disburse the amount in the same proportion to all the pending clients having receivable amount against their unsettled obligations, it said. According to the NSEL data, four members out of 24 have paid in Rs. 8.57 crore today to the bourse, against the the pay-out requirement of Rs. 174.72 crore. The four members include Metkore Alloys & Industries (Rs. 4.5 crore), N K Proteins (Rs. 2.1 crore), Sankhya Investments (Rs. 1.4 crore) and Yathuri Associates ( Rs. 58 lakh) The beleaguered NSEL has already defaulted in the last four pay-outs as it could gather only Rs. 92.73 crore in the first pay-out (August 20), Rs. 12.05 crore in the second pay-out (August 27), Rs. 15.37 crore in third pay-out (September 3) and Rs. 7.77 crore in the fourth pay-out (September 10), out of the scheduled Rs. 174.72 crore each time. The bourse, however, had availed a bridge loan of Rs. 177.23 crore from its promoter Financial Technologies (FTIL) to make payments on priority basis to small investors. NSEL, promoted by Jignesh Shah-led FTIL, is facing the problem of settling Rs. 5,500 crore dues to 148 members after it suspended trade on July 31 on the government direction. NSEL defaults sixth time Crisis-ridden National Spot Exchange Ltd (NSEL) on Tuesday made the sixth straight payment default, as it could pay only Rs 11.45 crore to investors out of the scheduled amount of Rs 174.72 crore. NSEL bourse had defaulted in payments on five previous occasions as well. With today's pay-out, NSEL has been able to settle just about Rs 148 crore out of Rs 5,500 crore outstanding to the 13,000 investors. "The amount being disbursed today is Rs 11,45,09,931.73," NSEL said in a statement.

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Members of the exchange are advised to disburse the amount in the same proportion to all the pending clients having receivable amount against their unsettled obligations, it said. According to the NSEL data, only 10 members out of 24 have paid in Rs 11.45 crore so far to the bourse, against the pay-out requirement of Rs 174.72 crore. The beleaguered NSEL has already defaulted in the last five pay-outs. It disbursed Rs 92.73 crore in the first pay-out (August 20), Rs 12.05 crore in the second pay-out (August 27), Rs 15.37 crore in third pay-out (September 3), Rs 7.77 crore in the fourth pay-out (September 10) and Rs 8.57 crore in the fifth pay-out (September 17) out of the scheduled Rs 174.72 crore pay-out each time. The bourse, however, had availed a bridge loan of Rs 177.23 crore from its promoter Financial Technologies (FTIL) to make payments on priority basis to small investors. NSEL, promoted by Jignesh Shah-led FTIL, is facing the problem of settling Rs 5,500 crore dues to 148 members after it suspended trade on July 31 on the government direction. NSEL bank accounts frozen; bourse defaults for 7th time The Economic Offences Wing (EOW) of the Mumbai Police has frozen 58 bank accounts connected with the Rs 5,500-crore payment crisis at the National Spot Exchange Ltd (NSEL). More accounts are likely to be frozen as the investigation unfolds. The NSEL said on Tuesday that it failed to execute its seventh weekly payout as its bank accounts, including the settlement account, were frozen. However, Rajvardhan Sinha, Additional Commissioner of Police (EOW) said, "The escrow accounts in which their money is to be paid have not and will not be touched. There should be no confusion about this aspect." The action comes a day after the police registered an FIR in connection with the payment crisis at NSEL, promoted by Jignesh Shah-led Financial Technologies. Meanwhile, the CBI has started an inquiry into the irregularities by NSEL. "We have registered a preliminary inquiry to look into all aspects," said Kanchan Prasad, CBI spokesperson. The EOW, which has registered a complaint against directors and trading members of the exchange, has been conducting search and seize at warehouses, offices and residences of the accused.

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"As of Tuesday evening, we have completed searches at 54 places in various parts of the country and they are still going on. The houses and offices of the chairmen of NK Proteins, Hyderabad, and Mohan India, Delhi were also searched on Tuesday, as were seven to eight warehouses," said Sinha. "We are basically dealing with the flow of money and trying to gauge the net worth at hand. The entire process of search and seizure will take at least two more days, after which we will begin analysing the data that our men have been tasked to collect," Sinha added. Meanwhile, more than 100 complainants claimed to have been allegedly cheated by NSEL on Tuesday. The number is expected to rise. The main complainant is Pankaj Sutar, who formed the NSEL Investors' Forum and had approached the crime branch around a month ago. NSEL defaults eighth time Crisis-ridden National Spot Exchange Ltd (NSEL) today made the eighth straight payment default, as it could pay only Rs 2.85 crore to investors against scheduled amount of Rs 174.72 crore. NSEL bourse had defaulted in payments on six previous occasions as well, while in the last (seventh) pay-out exchange was unable to pay as its account was frozen by economic offences wing ( EoW) of the Mumbai police. With today's pay-out, NSEL has been able to settle just about Rs 152 crore out of Rs 5,500 crore outstanding to the 13,000 investors. "The total amount being disbursed today in a proportionate manner is Rs 2.85 crore," NSEL said in a statement. Members of the exchange are advised to disburse the amount in the same proportion to all the pending clients having receivable amount against their unsettled obligations, it added. According to the NSEL data, only one member out of 24 members have paid in Rs 2.85 crore so far to the bourse, against the pay-out requirement of Rs 174.72 crore. The bourse, however, had availed a bridge loan of Rs 177.23 crore from its promoter Financial Technologies (FTIL) to make payments on priority basis to small investors. NSEL, promoted by Jignesh Shah-led FTIL, is facing the problem of settling Rs 5,500 crore dues to 148 members after it suspended trade on July 31 on the government direction.

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The bourse plans to settle the entire dues in 30 weeks time, by paying Rs 174.72 crore for the first 20 weeks followed by Rs 86.02 crore for next ten weeks.

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Government Interference
PMO (Prime Minister Office) plans to set up special team to look into NSEL issue With a payment crisis engulfing the National Spot Exchange Ltd (NSEL), the Prime Minister's Office is planning to set up a special team headed by the Economic Affairs Secretary to look into the issue. Besides Economic Affairs Secretary Arvind Mayaram, the team would comprise of secretaries of Department of Consumer Affairs and Ministry of Corporate Affairs, sources said. It would also comprise of officials of RBI, SEBI, Directorate of Revenue Intelligence and Enforcement Directorate. The mandate of the committee would also be to see that there are no systemic threats. NSEL has to settle Rs 5,600 crore of dues to investors after it suspended trading in all contracts recently on directions from the government. The exchange has said it will submit a settlement plan by today and has set up a four-member panel to monitor the process. The government has empowered the Forward Markets Commission (FMC), the commodity market regulator, to oversee the settlement. According to the NSEL, 21 entities owe nearly Rs 5,600 crore to investors, with the maximum liability of Rs 929 crore from N K Proteins. Eight of the entities have said they will pay their liability on time and 13 have agreed to pay 5 per cent of their total dues every week. In addition, there are three entities, with total liabilities of Rs 311 crore, which are yet to decide on the payment schedule. Mayaram submits report on NSEL A high-level panel, headed by Economic Affairs Secretary Arvind Mayaram, on Monday submitted to Finance Minister P. Chidambaram its report on the alleged irregularities at the National Spot Exchange Ltd (NSEL). The panel is said to have recommended two sets of measures to deal with the NSEL issue and also the problem of regulatory gaps in oversight of spot exchanges. Enforcement action has been recommended against NSEL and the persons behind the company, it is learnt. The main issue was whether NSEL violated the Government exemption for one-day forward trading and also the ban on all short sales.

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The panel is said to have spelt out the immediate measures to be taken against NSEL in the context of the investigations by various agencies. Several agencies such as the Enforcement Directorate, the Serious Fraud Investigation Office, the Income-Tax Department and the Forward Markets Commission were involved in the NSEL probe. For the long term, the report has made certain recommendations to strengthen the functioning of the Forward Markets Commission, which regulates commodities markets. The Commission, which has come under the administration of the Finance Ministry, had no powers to regulate spot exchanges. It was only a nominated agency till the NSEL crisis broke out. Since then the Consumer Affairs Ministry has armed the FMC with special powers to look at the NSEL payments crisis and take action. The Mayaram committee report is said to have recommended a regulatory framework for spot exchanges. But closing the regulatory gaps around spot exchanges will be the long-term solution. NSEL, part of Jignesh Shah-led Financial Technologies group, is facing a crisis in settling dues worth Rs 5,600 crore. ED submits report to finance ministry The Enforcement Directorate in its status report submitted to the finance ministry on Thursday on alleged financial law violations by National Spot Exchange indicated that the crisis-ridden bourse may have violated money laundering laws and a few foreign exchange procedures. The Enforcement Directorate (ED) was one of the two working groups that was looking into the payment crisis on the commodity exchange."The ED has finalised its report and submitted the same to the finance ministry. The report speaks about detected violations in a few instances and necessary regulations that possibly were not complied with," people familiar with the development said. People with direct knowledge of the matter said once the finance ministry and a panel of secretaries, headed by economic affairs secretary Arvind Mayaram, go through the contents of the report, legal action could be initiated against those involved in the operations of National Spot Exchange (NSEL). The ED, according to sources, could register cases under the Prevention of Money Laundering Act (PMLA) and may also launch a preliminary inquiry to probe forex violations under the Foreign Exchange Management Act (FEMA).

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The ED has prepared the report after obtaining data from the Income Tax department and the Forward Markets Commission (FMC) which have probed and gleaned through the finances of the exchange. The I-T had conducted surveys on two dozen entities which were involved in the exchange last month. The role of few individuals belonging to NSEL, whose names could not be obtained, figure in the status report. The other working group probing the same case has been constituted under a deputy governor of the RBI. The NSEL, promoted by Jignesh Shah-led Financial Technologies (India) Ltd, is facing the problem of settling Rs5,600 crore dues to 148 members/brokers, representing 13,000 investor clients, after it suspended trade on 31 July on the government direction. The Prime Minister's Office (PMO) had last month suggested setting up of a special team led by DEA. The panels were constituted to check possible systemic fallout of the NSEL crisis on the financial system, members of the panel include company affairs secretary, consumer affairs secretary and revenue secretary. CBI set to probe NSEL crisis With Finance Minister P Chidambaram on 26 september,2013 saying the Central Bureau of Investigation, the Forward Markets Commission and the Ministry of Corporate Affairs will look into the payment crisis at National Spot Exchange Ltd, the probe net on the exchange looks set to widen. Chidambaram said the three would look into different aspects of the troubles at NSEL, which flouted rules from Day-1, and take action under their respective jurisdictions. He added the income tax department was also checking the financial details of NSEL investors to see if any black money was involved. A committee headed by Economic Affairs Secretary Arvind Mayaram on Monday given its report on NSEL to the finance minister. The Mayaram panel report has suggested CBI, FMC and MCA must take appropriate action. They have listed the irregularities. . . They will take action, Chidambaram said at a press conference in New Delhi. FMC might file its report in a couple of days, after which the three bodies would decide on the action, he said. A CBI official said the agency was in the process of verifying the NSEL complaint.

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It was looking into the aspect of criminal offence to find out if there was an instance of fraud or cheating. The government had received a complaint from investors but not referred the matter to CBI yet. The agency, therefore, was also trying to establish whether the probe in this matter came under its jurisdiction, a senior CBI official said. Ruling out similarities between the crises at Satyam and NSEL, Chidambaram dropped hints that the government might not bail out the people that had put their money in the exchange, saying they invested with open eyes, knowing full well they were investing in an unregulated entity. The government does not come into the picture at all, he added. Chidambaram said NSEL was not a registered or recognised association under FMC; it got exemption even before it started its business. In the way NSEL started business, theres much more than meets the eye. People seem to have given money to NSEL promoters, knowing fully well that it is not a regulated entity. . . Many of them made money in initial stages and some lost money now... I have seen the exemption order. Now, whether it is valid or not has to be examined. he said. Of the 17,000 investors who put their money in NSEL -- which is now grappling with a Rs 5,600crore payment crisis -- 9,000 traded through eight top brokers, including Anand Rathi, Motilal Oswal, India Infoline and Systematix. According to the finance minister, the investors would definitely move court, as it is a matter between them and the company. The government had in 2007 exempted NSEL from provisions of the Forward Contracts Regulation Act to operate one-day forward commodity contracts. The exemption was given on some conditions, including delivery of commodities within 11 days and a bar on short-selling by members of the exchange. From Day-1, NSEL was violating the very conditions under which it claimed it could do business, he said. The Mayaram panel had suggested NSELs troubles had no systemic risk of an impact on other markets. However, Chidambaram said he had asked both the Securities and Exchange Board of India and FMC to keep a careful watch. NSEL, part of the Jignesh Shah-led Financial Technologies group, had to suspend trading on July 31 after a government directive.

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It had committed itself to clearing its dues to investors in tranches through weekly payments. But it has so far defaulted on its weekly obligations for six weeks in a row. Two other trading platforms -- Multi Commodity Exchange and MCX-Stock Exchange -- are also Financial Technologies-promoted entities. On whether the government was looking at changing the management of other entities with the same promoters, Chidambaram said: Let us wait for the regulators report. Supreme Court order on tainted MPs: FM accuses BJP of changing stand Under attack from the Opposition for bringing an ordinance to protect lawmakers from immediate disqualification, the Centre on Thursday hit back, accusing Bharatiya Janata Party of changing its stand on overturning a Supreme Court judgment on the issue. Finance Minister P Chidambaram had said in an all-party meeting on August 13 that there was a unanimous demand that something be done in relation with the Supreme Court judgment on Sections 62(5) and 8(4) of the Representation of People Act. They are entitled to change their mind but they should not ask everybody to do so, he said on 26 september,2013.

Court asks FMC to monitor books of NSEL, IBMA The Bombay high court on Monday directed commodity regulator Forward Markets Commission (FMC) and the Economic Offences Wing (EOW) of Mumbai police to monitor the books of National Spot Exchange Ltd (NSEL) and its subsidiary Indian Bullion Market Association (IBMA) to verify each request for settlement received by the exchange under e-series contracts. NSEL on 27 September announced a faster route to settle the dues of investors in e-series products by way of financial settlements from 3-9 October. E-series contracts are those in which retail investors can buy and sell commodities in demat form. NSEL is engulfed in a payments crisis after it suspended trading of forward contracts on 31 July without specifying any reason. It needs to settle Rs.5,600 crore owed to 148 members/brokers, representing 13,000 investor clients. The e-series contracts are different from these. Trading in these was suspended on 6 August. NSEL defaulted on the first six of its scheduled weekly payouts on the paired futures contracts and the seventh payout could not be undertaken after EOW froze its accounts.

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The court was hearing a petition filed by Tarun Jain and Ketan Shah, two investors of NSEL who have asked the court to stay the settlement of the gold and silver e-series contracts of the exchange. They wanted the e-series settlement to be clubbed with the other settlements. The two investors also wanted FMC to verify the authenticity of the gold and silver stocks under eseries and ascertain whether these were purchased with investors money. And they wanted the court to restrain NSEL from making payouts to preferred e-series investors. As per the courts order, NSEL will have to forward details of each and every settlement request received under e-series contracts to FMC and EOW, which will in turn allow Jain and Shah to inspect these. The two investors can within two days of inspection raise objections against such transactions along with reasons. The FMC will then investigate such transactions and give its decision within four days of receiving the objections. For such disputed transactions NSEL cannot make payment or deliver or physically deliver any bullion till the commodity regulator gives it a go ahead, the court said. The e-series involves 33,000 investors and around Rs.525 crore. A division bench of the Bombay high court, comprising Justices S.J. Vazifdar and K.R. Shriram said any rematerialization done by NSEL under e-series will have to be deposited in a designated account. The high court has also asked FMC and EOW to submit a report on the action taken by them against NSEL, its associate entities and the directors of the spot exchange by 18 October. Besides, the court has asked NSEL to submit the details of payment made through its settlement guarantee fund and the names of entities that received the funds since 1 April. The court will hear the case on 21 October after the inspection of the books of NSEL. The commodity market regulator in its submission to the court said since the e-series contracts are huge in number it cannot check each and every contract for alleged fraud. The court had earlier directed NSEL to use a designated account created for bullion contracts only for pay-in and not for pay-out till its final order. NSEL was supposed to start financial settlement of the e-series gold and silver contracts on 3 October. Jain and Shah have contended that the settlement of bullion contracts should be clubbed with paired contracts such as steel and paddy among others, which is being monitored by FMC in the wake of the payment crisis at NSEL.

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NSEL and IBMA cannot dispose off any property or create third party rights without the permission of FMC, EOW and the Bombay high court. The court will give its final order on 21 October.

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Conclusion & Suggestion

As the crisis is still going on and judgments are being taken so all the below conclusion and suggestion is, per my understanding From the making of this project I have got to know that not only NSEL somewhere FMC is a part of this crisis. As FMC has got a hint about wrong happening in trading of contracts in 2012 where amount was standing upto approx. Rs. 2000 crores. Well my suggestion for the future of the NSEL is that it should continue its trading once all the payments are cleared. There should be a regulator for NSEL under whose control it should performs his duties.

References:
http://www.nationalspotexchange.com www.moneycontrol.com www.thehindu.com www.indianexpress.com www.financialexpress.com economictimes.indiatimes.com www.business-standard.com www.capitalmind.in

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