The National Spot Exchange Ltd (NSEL) on Tuesday suspended trading of contracts in e-series till further notice,thus bringing its entire operations to a halt.
The government said it banned trading in e-series contracts at the NSEL as it wants the exchange to first settle about Rs 5,600 crore dues to investors. We decided to stop trade in e-series as we want to see first NSEL settles the dues, food and consumer affairs minister KV Thomas said.
An NSEL spokesperson said,We did not receive any government order till the time of sending out this release at 6 pm,but as an abundant precaution,we did not commence trading in e-series at 10 am. We will check with the authorities to find out the facts,and accordingly,we will fully comply with the government order.
NSEL has proposed that people holding stock can apply for converting to physical and the same will be facilitated by the exchange. People can also continue to hold the stock in demat form, NSEL said.
However,shares of Financial Technologies India,the promoter of NSEL,fell 20 per cent,after NSEL stopped trading in e-series contracts. The FTIL scrip slumped 19.60 per cent to settle at Rs 159.15 on the BSE. In intra-day trade,it plummeted 24.98 per cent to Rs 148.50. FTIL-promoted MCX shares were also down by 10 per cent to Rs 331.85 its lower circuit limit. On Monday,FTIL shares had rebounded by 31 per cent.
Under e-series,retail investors 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 payout 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 offers e-series contracts in gold,silver,copper,zinc,lead and platinum.
On August 1,NSEL had suspended trading in forwards and delayed settlements of contracts for 15 days,citing a fall in volumes after FMC asked exchanges two weeks ago not to launch new forwards contracts. NSEL blamed loss of trading interest and abrupt structural changes in marketplace for suspension of trade. However,the market was agog with speculation that the bourse did not have adequate stock of commodities to make the delivery. NSEL is now struggling to complete the payout of Rs 5,500 crore to investors.
Meanwhile,in a filing to the BSE,MCX said,Multi Commodity Exchange of India Ltd and NSEL are totally different entities with no financial commitments or exposure to each other whatsoever.