National Spot Exchange

National Spot Exchange Ltd.

Type	Private
Industry	Business Services
Founded	2005
Headquarters	Mumbai, India
Key people	Shri Uttam Prakash Agarwal, Chairman; Jignesh Shah, Non-Executive Director; Shaji Cherian, MD & CEO[1]
Products	Spot exchange
Website	www.nationalspotexchange.com

National Spot Exchange (NSEL) is a Commodities exchange in India, and is a joint venture of Financial Technologies (India) Ltd. (FTIL) and National Agricultural Cooperative Marketing Federation of India (NAFED). National Spot Exchange commenced its live trading operations in different commodities on Wednesday, 15 October 2008. It began trading in pre-certified cotton bales for Mumbai delivery and imported gold and silver bars for Ahmedabad delivery immediately, and has since added a number of commodities.

National Spot Exchange's stated mission is to develop a common Indian market by setting up a nation-wide electronic spot market and providing state of art trading, delivery, and settlement facilities in various commodities. This exchange is now in the middle of a controversy due to a major commodity scam and all the trades have been stopped.

Services offered

• Selling - NSEL provides an electronic trading and auction platform to sell commodities (Agri, bullion and Metals).
• Procurement - Bulk buyers can procure the agri-commodities directly from farmers through electronic platform provided by the NSEL.
• Warehousing - NSEL provides warehousing facilities for various commodities and also facilitate to sell it through the electronic platform to the bulk buyers and millers situated across the country.
• Investment - NSEL provides investment instruments. E-series products launched by NSEL can be bought by the investors for accumulation in the demat account, just like the shares in the equity market. Currently, E-Gold, E-Silver and E-Copper are available to investors.
• Arbitrage - A trader can do arbitrage using different prices available for the same commodity.

Facilities Offered

• Single day trading contracts
• Intra-day trading with settlement of obligation on net basis
• All positions outstanding at end of the day resulting into compulsory delivery
• Demat delivery facility available
• Fungibility of delivery between National Spot Exchange and MCX with common ICIN nos
• Loan facility against pledge of demat / warehouse receipt
• Cash futures arbitrage opportunity

E-Series product

A new form of commodities investment: Initiative of NSEL with E-Series Products

For the first time in India, National Spot Exchange has introduced E-Series products in commodities. Retail investors can now trade and invest in commodities like they invest in equities. This will be a unique market segment, which will function just like cash segment in equities, but offer commodities in the demat form in smaller denominations.

The clearing and settlement pay-in and pay-out will be based on a settlement cycle as per the practice in the stock market. This instrument will provide ample opportunity to the masses as secured investment in their product basket of diversification.

NSEL launched its first product under the E-Series as E-Gold on Wednesday, 17 March 2010. Clients/retail investors who wish to purchase E- GOLD units are required to open their beneficiary account with NSEL empanelled Depository Participants (DPs) and disclose their client ids and DP ids to their respective members to enable them to transfer the units to the respective client’s accounts. On receipt of demat ICIN in the CM-POOL account, the member should transfer the same to the beneficiary account of the respective client.

NSEL has made necessary arrangements with National Securities Depository Limited (NSDL), and Central Depository Services (India) Ltd. (CDSL) is the depository for holding commodity units in the electronic form.

E-series trading has been suspended w.e.f 5 August 2013 till further notice.

Pursuant to Forward Markets Commission’s (FMC) NOC to NSEL, dated 27 March 2014, the Exchange had initiated the process of rematerialization from 12 April 2014 and subsequently the Exchange commenced the ‘Financial Closure’ of the balance units of e-Series starting from 6 May 2014.Infoline, India (5 April 2014). "Financial Closure of e-Series". IndiaInfoline. Retrieved 5 September 2014. 

On 23 June 2014, the Exchange completed Financial Closure of e-Gold with total payment of Rs 154.77 Crores was made to the unit holders. Likewise, on 27 August 2014, the Exchange completed Financial Closure of e-Silver with total payment of Rs 141.23 Crore.^[2] The process of financial closure of Platinum, Copper, Lead and Nickel, which constitute the remaining balance 1.6% of the total value is in progress and is expected to be completed soon.^[3]

Despite the crisis, the Exchange has been able to recover Rs. 354 crore till 31 May 2014 and bridge loan of Rs. 179 crores was taken from FTIL (total Rs 533 cr) and paid to investors, with which it has cleared up to 50% settlement liability of around 7,000 retail investors. The newly constituted Board of Directors is leaving no stone unturned to recover outstanding from the defaulting members with a view to restoring confidence of investors on the financial markets.^[4]

Commodities traded with their delivery locations

Trading timings

FRAUD

The first payout from borrowers on NSEL to 148 broker members, representing 13,000 investors, was unsuccessful with the exchange managing to recover Rs 92.12 crore against the Rs 174.72 crore it was supposed to pay out every week for the next five months beginning 20 August. Nine of the two dozen borrowers who defaulted are NK Proteins, ARK Imports, LOIL Overseas Foods, Lotus Refineries, NCS Sugars, Spin Cot Textiles, Tavishi Enterprises, Vimladevi Agrotech, Yathuri Associates. Of these, NK Proteins has the highest liability of over Rs 900 crore. Other officials who were removed from their positions along with Sinha are Amit Mukherjee (assistant VP, business development), Jai Bhaukhundi (assistant VP, market operations), Maneesh Chandra Pandey (manager - business development), Santosh Mansingh (assistant VP - market operations), HB Mohanty (assistant VP - market operations) and Shashidhar Kotian ( CFO).

The Criminal angle in the whole scam has come under the scanner. The Central Bureau of Investigation (CBI) as well as Economic Offences Wing (EOW) of Mumbai police are investigating the case.^[5][6]

NSEL has taken considerable recovery initiatives, the Exchange has taken Legal actions against the defaulters. NSEL has filed 5 Arbitration petitions in Bombay High Court, 27 applications in MPID court and 30 complaints with the Magistrate Court with regards to bouncing of cheques. The bourse has also filed 20 complaints in EOW Mumbai Police which have not yet been registered as FIR therefore the Exchange has also filed 10 Section 156(3) applications with the Magistrate for FIR. NSEL has also issued Third Party notices to 15 Defaulters further to the Representative Suit filed by Modern India. These coordinated efforts have resulted in a historic order passed by the Bombay High Court where a Committee composed of three distinguished persons was formed to overlook the process of asset sale and recovery from Defaulters. The senior management and Recovery team has assisted and coordinated with FMC, MAC and various investigative agencies during the probe. The NSEL Board has been reconstituted and this Board along with new Senior Management Team has been effectively guiding and executing the entire recovery process.^[7]

References

External links

• NSEL zeroes in on five states for spot trading . Business Standard, 8 June 2008
• NSEL signs MOUs with states. The Financial Express, 4 June 2008
• February date for spot trade in farm crops, The Telegraph, 16 January 2007
• Spot exchange centres to be set up in Kerala, BusinessLine, 29 November 2006
• MCX to roll out spot exchange in January, BusinessLine, 24 November 2006
• National Spot Exchange website
• "NSEL Debacle", Economic & Political Weekly, 14 September 2013