Friday, 2 August 2013

NSEL fallout: Sebi says no risk to system

A day after crisis erupted at the National Spot Exchange Ltd, capital market regulator Sebi today said it is on "top of the situation" and there is no systemic risk as settlements are happening.


Aday after crisis erupted at the National Spot Exchange Ltd, capital market regulator Sebi today said it is on "top of the situation" and there is no systemic risk as settlements are happening. NSEL, which offers an electronic platform for spot market trading in various farm commodities as also bullion contracts, yesterday said it suspended trading in all contracts except "e-series" until further notice following a government order.


While the exchange has said it would meet all its payment and settlement obligations, its decision to defer the settlement to a 15-day period has raised concerns about potential payout defaults. Share prices of group firms MCX and FTIL dived 40 percent and 83 percent respectively in two days. "So far as the securities market is concerned, everything seems to be normal and in order. All the payouts and pay-ins are happening and there is no risk to the system," Sebi chairman UK Sinha told reporters here this evening after delivering the Lalit Doshi memorial lecture.

A number of brokers are present in both commodity and equity segments and there were fears that a potential systemic risk could emanate from issues of potential defaults spilling over to the stock market as well. "We are on top of the situation, we are reviewing it, things are perfectly normal and settlements are happening," the chairman further said.

FTIL shares plunged for the second consecutive-day today on the BSE to end at Rs 151.25, down 21.12 per cent. This came after yesterday's loss of over 62 per cent, while MCX declined  20 per cent to Rs 512. Sinha further said Sebi was also coordinating the government and commodity market regulator Forward Market Commission (FMC).

Earlier in the day, the Forward Markets Commission (FMC) chairman Ramesh Abhishek told PTI, "The government will take all possible action to protect the interests of investors. We are awaiting information from NSEL on the rationale behind deferring the settlement of contracts." "The NSEL is required to submit this information by the end of the day. Once we get that, we will analyse and send the report to the Consumer Affairs Ministry for appropriate action," he said. Last night, NSEL sought to allay concerns and claimed physical stock worth Rs 6,200 crore compared to total outstanding contracts of Rs 5,000-5,500 crore.

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