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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.
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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 physicalmarket 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
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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
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Major Achievements:
Milestones & Strategic Alliances
2013
MAR
Agreement with Hadher Group of establishments LLC, Abu Dhabi, UAE for Joint businessdevelopment 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
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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 NafedJUN
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 E-Governance 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
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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 GOVERNMENT TRADERS
Enables seamless connect
to the national market toensure sale of marketable
surplus
Enables better realization of
cess as NSEL submits astatement of all physical
deliveries to the authorities
Provides a wider and liquid
market, where huge quantitiescan be traded
Provides better price
discovery and realization
Enables Govt. companies to
enhance price realization by
conducting auction ofcommodities through NSEL
platform
Eliminates counterparty risk,
credit risk, and risk relating to
rejection at buyers godown atthe time of delivery
Empowers farmers to quotedesired selling price, which
is not available in mandiauction system
Promotes agro-industrialprocessing and exports as
uninterrupted supply of rawmaterials is assured through
NSEL
Ensures elimination of posttrade risks
Enhances bargaining power
due to availability of
alternative marketingchannel
Enables creation of important
trading hubs that generate
direct and indirect employment
Provides easy access to bank
finance against warehouse
receipts
Promotes grading and
standardization at farm
gate, leading to grade andquality based price
realization
All the aforementioned
objectives are achieved without
any significant cost to theexchequer
Provides a grading system for
effectively using the futures
market for managing theirrisks
Increases holding capacity
due to availability ofwarehouse receipt financing
Offers opportunities to
expand activities to multiplecommodities with operational
ease
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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 bothbuyers 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 itstechnology 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.
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Operational Flow chart regarding
Use of NSEL platform by a Farmer
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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 Delivery Centres
Arecanut Shimoga, Channagiri (Karnataka)
Bajra Jaipur (Rajasthan), HAFED Warehouse (Haryana)
Barley Jaipur, Chomu, Sikar, Srimadhopur (Rajasthan)
Basmati Rice (or
Rice)
Jakhal, Ratia, Raina - HAFED Warehouse (Haryana), Ludhiana (Punjab)
Basmati Paddy(or paddy)
Karnal, Nilokhari, Thanesar, Ladwa, Pehowa, Sirsa, Ismailabad - HAFEDWarehouse (Haryana), Warangal (AP), Ludhiana, Khamanon (Punjab)
Black Pepper Vandanmedu (Kerala), Saharanpur (Uttar Pradesh)
Cardamom (Oiltype & Splits)
Vandanmedu (Kerala)
Castor Seed Palanpur, Kadi, Jagana, Mehsana, Patan, Chandisar, Visnagar, Panthawada,Gandhidham, Sidhpur, Dhenera, Deesa, Harij, Vadali, Mundra, Himmatnagar,
Deodhar, Thara, Khedbrama, Vadgam (Gujarat)
Castor Oil Kandla (Gujarat)
Chana/Desi
Chana
Delhi, Bikaner, Jaipur, Sri Ganganagar, Malpura (Dist. Tonk) (Rajasthan),
Ganj Basoda, Vidisha, Guna (Madhya Pradesh), Osmanabad, Jalgoan(Maharashtra), Gadag (Karnataka)
Chana
Kantawala/Chana Kabuli
Indore (Madhya Pradesh), Jalgaon (Maharashtra)
Coal Mangalore (Karnataka)
Copra Tiptur, Arsikere & Tumkur (Karnataka)
Coriander Guna (Madhya Pradesh)
Copper Demat (e-Copper), Delhi
Cotton (Bales &
Kapas)
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
Oil
Kadi, Tramba (Gujarat), Shamshabad (Hyd) (Andhra Pradesh)
Gold Ahmedabad, Rajkot (Gujarat), Mumbai (Maharashtra), Kolkata (WestBengal), 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
seed)
Jodhpur (Rajasthan)
Lead Demat (e-Lead)
Tur (Lemon,
Malavi, Whole,Split Redgram)
Mumbai, Jalgoan (Maharashtra), Chennai (Tamilnadu), Ex-Godown Tandur,
(Andhra Pradesh)
Maize Maheshkhoont (Bihar), Jalgaon, Khopate near Uran (Maharashtra), Umerkote(Orissa), Davangiri (Karnataka), Kota (Rajasthan)
Masoor/Lentil Kolkata (West Bengal), Mumbai (Maharashtra)
Moong (GreenGram)
Mumbai, Jalgoan (Maharashtra)
Mustard Oil Jaipur (Rajasthan)
Nickel Demat (e-Nickel)
Pig Iron (ironore)
Jajpur (Odisha)
Platinum Demat (e-Platinum), Ahmedabad, Jaipur, Delhi, Hyderabad, Mumbai
Rajma (Kidney
Bean)
Ex-Godown (Andhra Pradesh)
Red Chilly Saharanpur (Uttar Pradesh), Khammam (AP)
RBD Palmolein Mundra, Kandla (Gujarat), Kakinada (AP)
RM seed(Mustard seed)
Jaipur, Jodhpur, Kota, Baran (Rajasthan), Narnaul, Rewari (Haryana)
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
(Crude)
Kota (Rajasthan)
Soybean Oil
(Refine)
Shamshabad (Hyd) (Andhra Pradesh)
Steel & Steel
TMT
Raipur (Chhattishgarh), Jharsuguda (Orissa), Kurnool (AP), Mumbai
(Maharashtra)
Sugar Kolhapur (Maharashta), Patna (Bihar), Kolkata (West Bengal), Ex-HAFED
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SUGAR MILL ASSAND, Ambala (Haryana), Dadariya, Dist. Vapi (Gujarat),
Sunflower Seed Jalgaon (Maharashra)
Sunflower Oil Shamshabad (Hyd) (Andhra Pradesh)
Urad (BlackMapte) FAQ
Mumbai, Jalgaon (Maharashtra)
Wheat Rajkot (Gujarat), Jaipur, Chomu (Rajasthan), Delhi, Vidisha (MadhyaPradesh), Ex-Odisha, Jalgaon (Maharashtra)
Wool (Raw) Ludhiana (Punjab)
Wool (top) Ludhiana (Punjab)
Yellow Peas Mumbai (Maharashtra), Kolkata (West Bengal)
Zinc 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 dematdelivery 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 e-
Platinum. 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 onaccounts 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 Monday to Friday Saturday
AGRI 10.00 to 18.00 10:00 to 14:00
NON-AGRI 10:00 to 23:30 10:00 to 14:00
Intraday Contracts (Agri / non-
agri)10:00 to 16:00 -
E-Series Product 10:00 to 23:30 -
Auction Contract
Products Monday to Friday Saturday
Silver 16:00 to 16:40 13:00 to 13:40
HAFED - Bajra, Basmati Paddy,
Paddy and Rice Contracts
12:00 to 15:00-
NAFED- Rajma & Whole Toor 12:00 to 15:00 -
Ball Copra 12:00 to 15:00 -
Sugar 10:00 to 11:50
and 18:00 to 19:30-
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:
Commodity Symbol
Trade timing
Monday to Friday Saturday
Gold Medallion MMTCGL8DEL 10:30 to 16:30 -
RBD Palmolein RBDGOKUL9RBDGOKUL9
10:00 to 17:00 10:00 to 14:00
http://www.nationalspotexchange.com/NSELUploads/ExchangeCircular/2012/December/976/NSEL235-2012.pdfhttp://www.nationalspotexchange.com/NSELUploads/ExchangeCircular/2012/December/977/NSEL236-2012.pdfhttp://www.nationalspotexchange.com/NSELUploads/ExchangeCircular/2012/December/977/NSEL236-2012.pdfhttp://www.nationalspotexchange.com/NSELUploads/ExchangeCircular/2012/December/976/NSEL235-2012.pdf8/12/2019 National Spot Exchange Ltd module 8
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Mr. Shankarlal Guru - Chairman
Mr. Jignesh Shah - Vice Chairman
Vice Chairman - MCX, Founder of FTIL
Mr. B D Pawar - DirectorDirector - CITA
Mr. Ramanathan Devarajan - Director
Financial Technologies Group
Promoters
NSEL is promoted by Financial Technologies India Limited (FTIL) and National AgriculturalCooperative 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 increating 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 setup on 2nd October, 1958 to promote co operative marketing ofagricultural 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 givethe 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 illegalsuch 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 percent peryear, 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 customersballooned 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 theKadi 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 abank. I can effectively borrow from you
at 15-18 percentmuch 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 loansloans 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, onthe 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 theNSEL warehouses. In a
few days they changed that position, stating they had onlyRs 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 asettlement 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
owedanything.
NSELs investors involved clients fromnearly every major broker in the country. Even the Sahara
Group, which is under RBI and SEBI fire, was found to have invested more thanRs 200 crore.
Some NSEL board members were close topolitical bigwigs like Union Agriculture Minister
Sharad Pawar. CEO Anjani Sinha had earlier in his career overseen defaults in two exchanges
inMagadh 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 exchangebut 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 befiduciary 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 upMCX 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 thatregardless 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. Decisiveaction 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 theBombay 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 ofChief JusticeMohit Shah and Justice M S Sanklecha was hearing a petition
filed byIndian 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 commoditymarket regulatorForward Market Commission and otherauthorities 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 formerjudge and former
MaharashtraDirector Generalof Police DSivanandan 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-ledFinancial 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 collectedfrom 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 e-
market/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 beingwith 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 waythings 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 Rs141.30its 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 crorewhich has been
distributed among investors.
On August 21, the FMC had asked NSEL to auction the commodities lying as collateral in thewarehouses 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 receiveamounts 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 receiptsof 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 beendeclared 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 ninewarehouses 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. Theentire 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 agre