The Securities and Exchange Board of India (SEBI) has begun a probe into a major crash in the shares of commodity bourse MCX and its promoter Financial Technologies triggered by issues at group entity National Spot Exchange Ltd (NSEL), and has sought details from stock exchanges and other agencies in this regard.
Financial Technologies India Ltd (FTIL) scrip today fell by nearly 65 per cent, while that of MCX (Multi Commodity Exchange) plunged by 20 per cent over concerns about NSEL.
While the shares have been on a downward path for quite some time, there was a major fall this morning after NSEL suspended trading of contracts, other than e-Series.
The issues being looked into by SEBI include the concerns of potential defaults to payouts to brokers and clients, fraudulent trade practices and possible violation of insider trading norms in the two listed group companies of NSEL.
A number of brokers are present in both commodity and equity segments and there is a potential systemic risk from issues of potential defaults spilling over to the stock market as well, sources said.
The SEBI, which is also in touch with Finance Ministry, commodity regulator FMC and Consumer Affairs Ministry in this regard, is looking into the trading pattern of some brokerage firms as well as many other entities to check whether they had any advance information about problems at NSEL.
The brokerage firms, which had significant exposure to NSEL, are specially under scanner, sources added.
Moreover, there have also been concerns about regulatory gap about jurisdiction of NSEL, lack of transparency about exposure of brokers and clients, payouts and potential default by the exchange, sources said.
The relevant data is being collected from the stock exchanges as also from the SEBI’s internal Integrated Market Surveillance System. Besides, information might be sought from the brokerages and the companies involved.
FTIL counter on BSE saw 62.54 lakh shares changing hands today compared to two-week average of 1.61 lakh. Similarly, MCX shares today saw 10 times of trading volume.
Sources said SEBI began looking into the matter a few days ago as the stocks of two companies had been falling for quite some time with unusual volumes.
Since July 11, the FTIL stock has been on a down trend except for one day July 29 when the stock ended in the green ahead of its quarterly earnings announcements.
MCX has fallen to a level that is one-third of its 52-week high of Rs 1,617 touched in November last year while FTIL is also down 90 per cent from its peak of Rs 1,223.80.
Incidentally, FTIL had recently said that it suspects some vested interests and a bear cartel behind the sharp plunge in its and MCX’s share prices.
Financial Technologies, in a statement last month said that since July 15, 2013, there have been many malicious rumours afloat about NSEL.