NSEL’s Scam – A Spotlight on Regulation of Electronic Spot Exchanges



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Introduction

The unearthing of a fraud at the National Spot Exchange Limited (NSEL) in electronic spot exchange activities, put paid to the policy makers’ (both central and state governments) objective of providing an integrated trading platform for agriculture products. In the month of June, 2013, NSEL failed to settle an amount of around Rs.56,000 million due to various participants who traded on the exchange .

Also, the Settlement Guarantee Fund (SGF) managed by the exchange, which, according to NSEL, had a corpus of Rs. 8,390 million, saw a depletion of funds and stood at only Rs.8.46 million at the time of the fraud . The Government of India (GoI) directed the Forward Market Commission (FMC) to probe the issue and also appointed several committees for the purpose.

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The investigations revealed a major mismanagement of operations and funds at NSEL. Several executives of NSEL were arrested in this connection including Jignesh Shah (Shah), Founder and Managing Director of Financial Technologies of India Limited (FTIL) , pending detailed investigation. In the meantime, keeping in view the interests of the investors, the GoI initiated the merger of NSEL with its promoting entity FTIL.

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