Sebi relaxes restraint order in castor seed controversy

Last May, Sebi had issued restraint orders against 18 entities from dealing in securities market

The Securities and Exchange Board of India (Sebi) announced a relaxation of its interim order against those accused in a price manipulation case of castor seed on the National Commodity and Derivatives Exchange (NCDEX) a year before.

Last May, it had issued restraint orders against 18 entities from dealing in the securities market, as an interim measure till the investigation was concluded. That was after a development in January on the exchange, when castor prices started falling and those having long positions couldn’t pay the mark to market margin. And, NCDEX had to suspend castor seed futures in end-January 2016.

Sebi investigated and took restraint action against 18 entities, including edible oil major Ruchi Soya. It charged them with collusive action.

Wednesday’s order from Sebi wholetime member G Mahalingam says: “I find it appropriate to accede to the request for relief sought by the noticees and permit them to trade in the commodity derivatives markets for the limited purpose of hedging their physical market positions, under the supervision of the exchanges.”

The reason given was: “An entity engaged in trading activity in physical commodities may at some stage need to offset price risks or allow risk reduction/risk containment incidental to its cash or spot operations and, thus, would need an exposure to the derivatives market for bonafide hedging.” The order also allowed a small trader, Narsinpuria Korodimal, to continue trading but abiding by all the rules of regulators and exchanges.