Commodity market regulator Forward Markets Commission has issued a show cause notice to Shreekant Javalgekar, Managing Director, Multi Commodity Exchange for allowing a group company, Indian Bullion Markets Association (IBMA), to trade on its platform.
The Association is a subsidiary of Financial Technologies, which is the promoter of MCX. Formed in 2009, the Association, which was mooted by the National Spot Exchange, is a consortium of leading bullion dealers and jewellery merchants.
Financial Technologies also owns NSEL, which is struggling to conclude the trade settlement after it shut the exchange abruptly on August 1.
Under the Forward Contracts (Regulation) Act (FCRA), an entity belonging to the exchange’s promoter directly or indirectly is not allowed to trade on the exchange’s platform, said a member of the Commission, who did not want to be named.
Claiming that the exchange does not have any open position or trade obligations with IBMA as of date, MCX said FMC has sought information about IBMA’s volume and open interest on the exchange.
In a statement, the Multi Commodity Exchange’s IBMA volume as a percentage of total exchange turnover was 0.09 per cent in FY’13, and 0.17 per cent so far this fiscal. As on date, the Exchange does not have any open position or pay-in/pay-out obligations with respect to IBMA, it said.
Earlier, Jaypee Capital which picked up about 23 per cent stake in the National Commodity and Derivatives Exchange was also told to surrender its trading membership with the exchange.
The Rs 177-crore settlement made by the NSEL last Tuesday, was not done through the escrow account opened for the settlement process. The amount raised from Financial Technologies was disbursed as per the exchange’s discretion and did not have the FMC approval, alleged certain members.
A member of the FMC said, whatever money comes into the escrow account needs to be disbursed on a pro-rata basis as per the schedule agreed by the exchange. But if somebody wants to pay small investors on priority, why it should be objected, he asked.
About 608 investors were paid their entire due of Rs 2 lakh, while another 6,380 investors who where to receive between Rs 2 lakh and Rs 10 lakh got 50 per cent payment. The remaining payment will be paid proportionately as per the settlement plan.
Additional margin imposed on gold, energy futures
Concerned over the volatile gold prices and possible default by investors, commodity market regulator Forward Markets Commission (FMC) has imposed an additional margin of five per cent on gold, silver and energy contracts.
“In view of the current price volatility, the Commission has decided to impose an additional margin of five per cent on all the gold, silver, brent crude oil, crude oil and natural gas contracts traded on the national exchanges till further orders,” said the Commission in a statement.
Besides additional margins, exchanges have been told to impose initial margin of five per cent on the contract value.
The directive will come into effect from Monday, said FMC.