With the second tranche of payouts from NSEL due on Tuesday, Forwards Market Commission chief Ramesh Abhishek, in a conversation with Ira Dugal and Devangi Gandhi, says it is the responsibility of the exchange to liquidate stocks and take action against defaulters.
In the wake of the looming default on the second payouts due Tuesday, why has process of liquidation of stocks not picked up?
It is the exchange that is responsible for liquidating the stocks and as well as for taking action against the defaulters as per the exchange bylaws. It is not the job of FMC to take these activities. If there is a default in any stock exchange, it would be the exchange taking the action and not the Sebi. At this juncture, we are required to supervise the payins and payouts. However, not much is moving around these activities.
Even in the case of defaultors, the exchange has to take action against the defaultors as per their by-laws. Our role is that we have to supervise.
Is another default looming?
Looming is the correct word. Let?s hope good sense prevails.
If the pay-ins are not being made, is it the exchange’s liability now to make good on the payment schedule?
As per the exchange by laws, which we also highlighted in our correspondence to NSEL, it is absolutely the exchange?s liability to guarantee the settlement from the very first day of activity. If they fail to do so, it is their responsibility.
When will the FMC take a view on whether the promoters are considered ?fit & proper? which will have a bearing on MCX and, perhaps, MCX-SX?
If the promoters or the directors don?t meet their obligations, we have said that ?fit and proper? will come into serious doubt. If that happens, we are authorised to take action in our related exchanges ? which is MCX.
Will it be a judgment call on your part or is there a proper procedure laid out to declare an entity not ?fit & proper??
In our letter to the board, we have stressed that
their status as a fit-and-proper person can come under pressure if they continue to default.
We are waiting for tomorrow?s payout before deciding on this. If you read the letter carefully, it is very clear.Our intention is not in doubt.
To your mind, what could be the fallout on MCX?
I think MCX volumes were down 40% in July due the impact of commodities transaction tax. In August so far, we have not seen a perceptible impact of NSEL crisis on MCX volumes.