The crisis was precipitated by sceptic investors when the exchange introduced 11-day commodity contracts.
MUMBAI: In March 2001, the stock market was rattled by a payment crisis at the Calcutta Stock Exchange, then a den of some of the biggest operators in the country. Over the years, it became a distant memory with regulatory checks and balances. But on Wednesday, old fears returned to haunt traders. On Thursday morning, an army of brokers thronged the head office of National Spot Exchange (NSEL) in Mumbai's AndheriEast, demanding the commodity bourse pay up.
The exchange could not meet its payout commitment after it suspended trading on several contracts that have been disapproved by the government. NSEL is promoted by Financial Technologies (FT), a company led by Jignesh Shah, an aggressive entrepreneur better known for his street-smart ways and confrontational style.
"We are confident that NSEL will resolve the situation within the contours of its byelaws and rules," said Shah in a statement to BSE.
Trading positions worth Rs 5,500 crore are outstanding on NSEL, which has halted trading for a fortnight. The crisis was precipitated by sceptic investors when the exchange introduced 11-day commodity contracts to replace the earlier longer-term products the Department of Consumer Affairs felt were essentially forward contracts a spot commodity exchange cannot offer.
The exchange could not meet its payout commitment after it suspended trading on several contracts that have been disapproved by the government. NSEL is promoted by Financial Technologies (FT), a company led by Jignesh Shah, an aggressive entrepreneur better known for his street-smart ways and confrontational style.
"We are confident that NSEL will resolve the situation within the contours of its byelaws and rules," said Shah in a statement to BSE.
Trading positions worth Rs 5,500 crore are outstanding on NSEL, which has halted trading for a fortnight. The crisis was precipitated by sceptic investors when the exchange introduced 11-day commodity contracts to replace the earlier longer-term products the Department of Consumer Affairs felt were essentially forward contracts a spot commodity exchange cannot offer.
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"The Department of Consumer Affairs has asked FMC to seek information from NSELregarding the rationale of the exchange for the above decision, its plan of action for meeting the settlement obligations of all the open contracts and other relevant information in this regard," said Consumer Affairs Minister KV Thomas.
While exchange officials assured that payments would be made and there was adequate collateral of physical commodity, there was panic in the market. Small and mid-cap stocks, along with shares of several brokerages, fell. The FT stock suffered its biggest single-day fall, crashing 64.59% (Rs 349) to close at Rs 191 while MCX, another FT group company and a listed commodity futures exchange, hit a 20% lower circuit to end at Rs 512. 
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