The NSEL Payment Crisis: The Price of Poor Regulation and Supervision
The nearly $1 billion payment crisis at the unregulated National Spot Exchange Ltd is possibly the biggest scandal in the Indian commodity markets of this decade spawned by the combination of a lackadaisical regulatory regime, greedy promoters and easily pliable bureaucrats and politicians. The NSEL payment scandal is a classic case of the failure of regulation and supervision of Indian commodity markets, argue the authors.
Surprisingly, the NSEL has been functioning as an unregulated commodity exchange for the past many years. It is only after the crisis that the commodity forward trading regulator Forward Markets Commission (FMC) — functioning under the Ministry of Consumer Affairs — stepped in as a monitoring agency. Later on, the FMC was brought under the administrative control of the Ministry of Finance. The NSEL is a part of Financial Technologies India Ltd (FTIL), promoted by Jignesh Shah, who, among others, owns MCX Commodity Exchange and MCX-SX Stock Exchange. The NSEL spot trading platform for commodities began “live” trading on October 15, 2008, and currently controls 99 per cent of the market.