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The Forward Markets Commission (FMC) has rapped the Universal Commodity Exchange (UCX) and National Multi Commodity Exchange (NMCE) for wash trades.
These are a form of manipulation in which an investor simultaneously sells and buys the same financial instruments to artificially increase the trading volumes. In certain instances, wash trades are conducted to compensate them for something that cannot be openly paid for.
Regulatory sources reveal that after the first report, given in the first week of March, of the forensic audit done by PricewaterhouseCoopers of Multi Commodity Exchange (MCX), the FMC conducted inspections at all commodity exchanges during the last week of March.
“Following our investigation, we found instances of rampant wash trades at UCX and NMCE,” said a senior FMC official.
Earlier, the PwC forensic audit had said there were wash trades on the MCX platform to the tune of Rs 2,052 crore, the number of these being 18,521. Business Standard has reviewed a copy of this report and it names traders such as Tradebulls, Vishwas Broking, Riddhi Siddhi Bullion, Edelweiss Trading and Jindal Dyechem.
Before taking any action following the investigations at UCX and NMCE, the regulator asked the board of directors to explain. “A few independent directors decided to leave the board following these findings,” said the FMC official
The volumes at commodity exchanges were unnaturally high during the months of January, February and March. Smelling a rat, FMC asked the comexes to furnish the trade data. According to market sources, wash trades usually occur at the end of a financial year, to boost volumes and make for good figures.
A UCX spokesperson said the traders who manipulated volumes had been dealt with. “The regulator asked us for data of three months; we furnished it. We have also suspended the traders on our platform that indulged in wash trades,” said the spokesperson. An email query to NMCE remained unanswered.
Earlier, MCX had taken action against employees who’d made illicit gains from wash trades. MCX had filed 10 complaints against its employees with the city police’s economic offenses wing.
