The move comes in the context of a possible payments crisis at NSEL, which has unsettled transactions to the tune of Rs 5,599 crore following the suspension of settlements since last Wednesday. The regulator has also directed NSEL to immediately disclose details of stocks in warehouses valued by NSEL at R6,200 crore including the quality and quantity of the physical commodity. The exchange has been told to make this information public by Monday night.
The FMC has also asked NSEL to first settle the dues of around 7,000 retail clients owed less than R10 lakh each and to deal with such clients directly and not through brokers.
FMC chairman Ramesh Abhishek told FE that MCX has been directed not to give any loans, advances or make any financial commitment to any corporate or non-corporate entity without FMCs prior approval, excepting transactions in the normal course of business. This financial ring-fencing has been done to instil confidence among investors, Abhishek said.
The FMC chief said it would be receiving all the information. They have been asked to put up the information regarding all their warehouses, where they are located, address, quantity quality, name of the owner and goods on their website immediately. They have also been told that, as and when money comes in, retail clients should be paid first, he said.
The regulator has also directed all exchanges under its purview to immediately call their respective board meetings to discuss the fall-out of the NSEL matter and take necessary measures. It has, however, given direct instructions to MCX, which belongs to the same group promoted by Jignesh Shah.
The flagship Financial Technologies (FTIL), the holding company of NSEL, also owns 26% stake in MCX. In 2012-13, MCX clocked in revenues of Rs 499 crore and held cash & equivalents worth Rs 1,274 crore. Neet sales of FTIL, for the period, were Rs 3,283 crore and it possessed cash & equivalents of Rs 2,013 crore.
Interestingly, on a day when Shah announced the formation of a four-member independent oversight committee to monitor the financial closure plan being worked out by the exchange, the regulator has been empowered by the government to supervise this whole process.
The government has sent us a letter where it has authorised FMC to supervise the settlement process... FMC can now issue any order to NSEL that seems fit for that purpose (settlement), said Abhishek.
Meanwhile, Shah, founder of Financial Technologies, the holding company of NSEL, said on Monday that a detailed schedule of proposed payout would be made public by August 14.
Broker-wise net obligations will also be disclosed on the NSEL website in the coming days, Shah added. Shah, however, failed to explain the drop in the settlement grantee fund (SGF) the contingency fund set aside by exchanges to meet any liquidity crisis from Rs 800 crore to a reported Rs 60-70 crore.
Addressing the media, Shah explained that the lower figures are the net pay-in obligations arrived at after deducting the margin money paid by members, which is adjusted against their net outstanding positions. However, he could not provide the exact value of outstanding trades after such an adjustment in the SGF.
Confirming NSELs earlier announcement, Shah said it may take up to five months for various members to clear their dues of close to Rs 3,100 crore with delayed payments attracting a 16% penalty.
Members who do not co-operate with the exchange may face FMC action; all possible law-enforcing measures would be taken against them, he added. NSEL had said on Saturday that the three entities with whom negotiations for outstandings of Rs 311 crore are on include Namdhari Food International, Namdhari Rice & General Mills and Lotus Refiners.
Shah also instituted a four-member independent oversight committee comprising former bureaucrat Sharad Upasani, former Sebi chairman GN Bajpai, justice RJ Kochar and retired IPS officer D Sivanandan to monitor the financial closure plan being worked out by the exchange.
NSEL also failed to provide latest data on the stocks of various commodities and the warehouses where they are stored. There are concerns that any distressed liquidation of such stocks, currently valued by NSEL at Rs 6,200 crore, may result in a smaller amount being recovered.
Shah said commodity producers preferred a financial settlement of the outstanding contracts and liquidation of stocks, at the warehouses, would be considered if the planter members failed to meet their financial obligations.We can assure you that the sellers or the investors who are awaiting their payout would not have to bear the price risk associated with these commodities in case of their liquidation, he added.
Meanwhile, eight processor members who have agreed to pay dues of Rs 2,181 crore, by the due date or earlier and payments may come through by mid-September given that their due dates are based on the settlement cycle before the restrictions were posed to cap them at 11 days.
Shah also said that NSEL is constituting two more committees of planters and brokers. The committee on sell side members could help in passing the updates on the payout in an orderly manner, Shah added.