NSEL suspends trading in all one-day forward contracts

The National Spot Exchange on Wednesday suspended trading of all contracts, other than e-Series, till further notice.

The exchange also said it would be merging the delivery and settlement of all pending contracts, other than e-Series.

The positions outstanding in these contracts will be settled by way of delivery and payment after 15 days. The exchange will be announcing a revised settlement calendar and contracts due for settlement after this 15-day period.

This order is aimed at resolving the confusion that followed after the exchange's move last week.

Consequent to doubts raised by the Department of Consumer Affairs, Government of India over possible short-selling in certain contracts on the National Spot Exchange, last week the exchange had shifted all contracts into the trade-for-trade category. Trade-for-trade means all parties have to compulsorily settle each leg of the transaction either by cash (purchaser) or delivery of goods (seller). In effect, no transaction would be allowed to be squared-off. The settlement of contracts was also reduced to T+10 cycle (i.e. settlement to be on the 11th day) by paying money (by buyers) or delivery of goods (by sellers).

However, the exchange had not changed the trading, settlement and physical delivery of e-Series contracts like e-Gold, e-Silver, etc., where trading continued as usual.

Although last week's move to shift all contracts into the trade-for-trade category was taken with a view to ensure orderly participation without creating any negative sentiments in the market, it led to abrupt structural changes in the marketplace leading to disruption, and uncertainty among traders. Volumes on the exchange fell sharply as the move created uncertainty and doubt about continuity of trading on the Exchange and hence most participants started withdrawing from the market, the National Spot Exchange said in a note.

The latest move is a result of the exchange having given an undertaking to the government on July 12. The exchange spokesperson said, "Since we have submitted an undertaking to the ministry, we understand, in the next few days we will get a reply from them based on which we shall re-launch contracts." Till that time, trading in e-series contracts will continue.

The exchange said that it will ensure that the process of settlement takes place in orderly manner and all participants get their rightful dues in accordance with rules.