Financial Tech plunges 66% on NSEL crisis, MCX drops 20%

Moneycontrol Bureau

Financial Technologies shares crashed more than 66 percent in morning trade Thursday after the National Spot Exchange (NSEL) suspended trading in all one-day forward contracts, except e-series contracts, amid fears of default.
NSEL is promoted by the Financial Technologies India (FTIL) and National Agricultural Cooperative Marketing Federation of India.
The move by the exchange follows directions issued by the Department of Consumer Affairs on July 12, 2013. The exchange had given an undertaking to the Government and simultaneously, with a view to ensure orderly performance of the markets, introduced T+10 contracts with Trade for Trade settlements.
NSEL also postponed settlement of one-day forward contracts. The exchange has decided to merge the delivery and settlement of all pending contracts and to defer it for a period of 15 days. Consequently, the positions outstanding in the contracts will be settled by way of delivery and payment after expiry of 15 days, the release said.
According to a release, a revised settlement calendar will be announced by the exchange for contracts due for settlement after such 15 days period.
 
 
 
 
 
 
 
 
 
Meanwhile, the NSEL clarified that the trading and settlement as well as physical delivery pertaining to e-series contracts like e-gold, e-silver etc. will continue as usual.
The action taken by NSEL basically translates to almost all volumes or turnover of the exchange coming to a standstill or near zero. E-series contracts do not have much volumes on the exchange. It is hardly Rs 3-4 crore and the turnover of the exchange has anyways fallen from roughly around Rs 800-900 crore a day to nearly Rs 300 crore because of the actions taken by the Ministry of Consumer Affairs.
On July 23, NSEL had reduced delivery, payment and settlement period of all contracts traded on the exchange to less than 11 days (T+10 or less), wherever settlement schedule was extending beyond 11 days.  NSEL had also decided to convert all the existing contract on trade for trade basis, which means that every trade must result into delivery.
“The exchange had reduced cost of transaction in respect of all these contacts by 80 percent. The cumulative cost of transaction, delivery and warehouse receipt transfer was earlier Rs 100 per one lakh of turnover, which has been brought down to Rs 20 per Rs 1 lakh of turnover,” according to a release issued on July 23.
The stock crashed more than 66 percent intraday to touch an all-time low of Rs 182 on the BSE. At 11.58 hours IST, it lost 58.90 percent to Rs 222.55 amid hefty volumes.
FTIL is also the promoter of Multi Commodity Exchange of India (MCX). MCX shares plunged 20 percent to a record low of Rs 512.05.