Sebi seeks details from brokers on exposure to NSEL: report

Market regulator Securities and Exchange Board of India (Sebi) has sought details from various brokers about their direct and indirect exposure to the National Spot Exchange Limited (NSEL), even as shares of its listed group entities Financial Technologies and MCX continued to bleed for the second straight day.
      
The regulator is also seeking to ascertain that the brokerage firms and individual brokers have put in place effective 'chinese-wall' like structure to ensure that the problems in spot commodity markets do not spill over to the equity and other segments.
     
According to sources, Sebi wants the brokers to ensure that their exposure to NSEL are secured by sufficient collaterals and any problems on that front do not affect the liquidity position for their brokerage operations in equity, currency and other segments.
     
NSEL, which offers an electronic platform for spot market trading in various farm commodities as also bullion contracts, has suspended trade in almost all its products.
    
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.
    
NSEL chief Anjani Sinha on Thursday night said that the exchange has physical stock worth Rs 6,200 crore, which exceeded the total outstanding contracts of Rs 5,000-5,500 crore.
     
As many brokerage firms trading on NSEL platform are also present in other segments like equity, currency and derivative markets, any payout default at NSEL could lead to collateral damage in various segments of capital markets that are regulated by Sebi.
     
A major crisis erupted at NSEL yesterday after it suspended most trades on its platform, prompting the government to order an enquiry by the commodity regulator FMC, while Sebi also began a separate probe amid a crash in shares of two listed group companies.
     
The share price of NSEL's promoter entity Financial Technologies fell 65 per cent yesterday, while another group firm Multi Commodity Exchange (MCX) plunged 20 per cent.
     
In Friday's trade, both FTIL and MCX extended yesterday's fall and plummeted 21 per cent and 20 per cent respectively.
     
Sebi has launched a probe into the matter and is looking into potential violations of rules related insider trading, fraudulent trade practices and possible payment defaults.
     
Besides, the consumer affairs ministry, finance ministry and commodity regulator FMC are also keeping a close watch on the situation.
     
NSEL's move to suspend trade in all contracts, except for 'e-series' products like gold and silver, came a fortnight after government asked it not to launch new contracts.
     
The bourse blamed "loss of trading interest" and "abrupt structural changes in marketplace" for suspension of trade.