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Case
-
Reference no. 714-080-1
Published by:
Amity Research Centers (2014)
Length:
14 pages
Data source:
Published sources

Abstract

NSEL was India’s first electronic commodities spot exchange that commenced its trading operations in the year 2008. It was a joint venture between Jignesh Shah promoted Financial Technologies (India) Ltd (FTIL) and the National Agricultural Cooperative Marketing Federation of India (NAFED). In a short time span, NSEL became India’s largest spot exchange in regard to total volume of trades amongst spot exchanges. But analysts and industry watchers pondered how high volumes were maintained on NSEL, while its rival NSPOT was quiescent. It soon came to fore that the exchange was dealing in long-term forward contracts, despite its virtue of being a spot exchange. Furthermore, it was revealed that there was ‘short selling’ (sale without back up of physical goods) in contracts which was banned on spot commodity exchanges. Many investors had lost their money and NSEL faced Rs 56 billion settlement crises. NSEL was accused of being an exchange, configured as a conduit for carrying out the scam, and Shah was arrested for his role as an executor of the fraud. But analysts mooted the fundamental question, 'How did NSEL operate in a vacuum without any supervision of a regulator'?

Topics

National Spot Exchange Limited; NSEL; Financial markets scam; Jignesh Shah; Paired contracts; Vyaj badla; Corporate veil; Financial Technologies India Limited; MCX; Forward markets commission; Short selling; Limited liability; Ponzi scheme; Regulatory vacuum; Spot market in India
Location:
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Other setting(s):
2014

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