NCDEX takes action against four members in castor seed futures case

Places their trading terminals on square off mode, implying that no fresh trading would be allowed to them

After suspending futures trading in castor seeds, National Commodity and Derivatives Exchange (NCDEX) on Monday placed the trading terminals of some of its members under square-off mode. This means, they can only square off their open position and no fresh trading would be allowed.

These four members are Mid India Commodities, Investsmart Commodities, Neer–Ocean Multitrade, and Leo Global Commodities. Their terminals would remain in square-off mode until further notice, the exchange said in a statement on Monday.

An exchange spokesperson said, “The exchange has initiated investigation into the role of members and their clients through external audit firms.”

NCDEX had suspended trading in castor seed futures contracts on January 27. The contracts were among the most liquid and contributed to almost 15 per cent of the exchange’s daily volumes. While the exchange says “the suspension was to maintain market equilibrium and in the general interest of the commodities market”, several market players have echoed complaints that the abrupt suspension has rescued those who were on long side as they were making losses after their bets went wrong and prices started falling.

Traders have also said that, following the suspension, “buyers’ losses get transferred to sellers by force and hence it is illegal”. The regulator even asked the exchange to explain what had led to a situation warranting suspension. The exchange, however, stated “any member found guilty of violations of the rules, bye-laws and regulations of the exchange shall be strictly dealt with”. NCDEX had also explained that one of the reasons for the suspension was that castor futures prices were falling and if the downward trend continued, it would have affected farmers.

Meanwhile, the Bharatiya Kisan Sangh has welcomed NCDEX’s decision to suspend the futures trading of castor seeds.

“Now we are waiting for our demand of introduction of MSP (minimum support price) to be fulfiled, which we are hopeful that the new government under Narendra Modi will consider in the interest of farmers,” it added.
FOUL PLAY

• NCDEX had suspended trading in castor seed futures contracts last Wednesday
• The contracts were among the most liquid and contributed to almost 15 per cent of the exchange’s daily volumes
• The exchange said it suspended the contacts to maintain market equilibrium and in the interest of the commodities market