New Delhi: Terming the problems at National Spot Exchange Ltd as its "own creation", the government Thursday said it is keeping a close watch on the issues that have surfaced following a halt in trade announced by the bourse.
Following weeks of problems related to its various contracts, the NSEL late last night announced suspension of trade on its all contracts except for 'E-series' products.
The matter has led to sharp fall in share prices of two group firms and raised concerns about potential pay-out defaults by the exchange to brokers and clients.
Consumer Affairs Secretary Pankaj Agarwal said the credibility of NSEL has been "dented" and the government has been telling them to act as per terms and conditions for last one and half to two years.
"I have talked to SEBI and Secretary to the Department of Economic Affairs on this issue. We are all in touch," Agarwal said.
He said the SEBI and Department of Economic Affairs had a meeting this morning on this issue, but they have not yet communicated to the Consumer Affairs Ministry about any measures that need to be taken.
"We are all shocked. About the impact, we are studying the legal implication. Government is fully ceased of the matter. It is legally examining every aspect. This was NSEL's own creation. ...We are not running away from taking action against them," the secretary said.
NSEL's last night decision to suspend trading follows a Consumer Affairs Ministry directive last month asking the bourse not to launch any new contracts till further order as it found violations of government norms in trading at NSEL.
Shares of Financial Technologies (India) Ltd, the promoter of NSEL, tumbled by 64.59 percent on the BSE. MCX, also promoted by FTIL, tanked 20 percent.
Agarwal said the SEBI is also keeping a watch as there might be common brokers at NSEL and in capital markets.
Asked if the commodity market has been affected due to NSEL development, "It is a major blow to FTIL and MCX. We have not heard any impact as of now on commodity market."
Stating that the exchange was given exemptions with certain terms and conditions, he said: "It is a wrong impression being given that NSEL is out of government control. NSEL is an entity created under FCRA Act. We are watching. The exchange has suspended contracts and postponed settlement."
While the commodity market is India is regulated by Forward Markets Commission (FMC), NSEL does not come under its jurisdiction for most of its products.
Asked if the government plans to withdraw the exemption given to NSEL, he said, "I cannot say now. We are examining all options."
"The credibility of the exchange has definitely (been) dented. ...We are definitely keeping a watch on NSEL," he said, while adding that the ministry officials are in touch with NSEL to know about its settlement plans, stocks and liquidity.
First Published: Thursday, August 01, 2013, 18:36