FMC to appoint auditor to probe NCDEX fiasco

Commex submits report to FMC

With the panic over Saturday's technical snag at the Ncdex tapering off in the markets, commodities regulator Forward Markets Commission (FMC) has initiated follow-up actions.

An FMC team visited Ncdex on Monday for a spot investigation, even as external auditors are set to conduct a detailed audit of all transactions that took place on Saturday.

"The exchange has submitted a report to us on what happened on Saturday and we are examining it," said S Sundareshan, Chairman, FMC.

FMC has already sent its three-member team for the spot investigation. An external auditor will be appointed to audit all the transactions that took place on Saturday, he informed.

Ncdex spokesperson said trading was normal on Monday. FMC is separately looking into the abnormal movement in prices of chilli and black pepper futures in recent months. The regulator is also looking into the backwardation in some of the commodities, where futures prices are lower then the spot prices.

In case of commodities which are very volatile automatically additional or volatility margins are levied. If required, a decision will be taken on levying more margin-related measures, he said. Meanwhile, in a CII-sponsored seminar, the FMC chief emphasised that a small penalty would not act as a sufficient deterrent to defaulters. The commodities market would soon have a system of even more severe penalties in place. Stressing that the exchanges are in a closer position to monitor the activities of members, Sundareshan underlined the need for zero-tolerance for misdemeanours by clients or members.

P H Ravi Kumar, managing director, Ncdex, on the sideline of a national conference on 'Commodities and Futures Trading' on Monday in Mumbai assured that the technical snag on the Ncdex would not repeat in future. "This has happened as one of our V-Sat connections failed, which was later confirmed by our technology provider HCL Technologies based in Gurgaon. With the connection of about 650 members failing, we thought of switching off the entire server in order to protect the interest of traders across all sections," he added. Ncdex conducts trades through three facilities namely, internet, V-Sat and lease lines. Once a system fails and a large number of traders are affected, it is logical to switch off the entire exchange, as those who are not connected would be affected, Ravi Kumar said.

"HCL officials are here with us throughout the day and we are striving to find out the reasons behind this technical problem, he added.

In order to control such failure, the premier exchange on agribusiness is setting up a disaster recovery cell in Chennai next month.

Mistrust, if any, does spoil the reputation of the exchange and questions the entire trading system in the country, said Jignesh Shah, MD and CEO of MCX, on the sidelines of the seminar.

After a continuous fall last week, the prices of pepper and chili futures jumped back on the Ncdex, though marginally. Pepper futures showed a rise of around 2 per cent against the closing price last week and chilli hit the 4 per cent upward circuit.

On Monday, the prices of November and December chilli futures closed at Rs 4,755 and Rs 5,090, up Rs 178 and Rs 212 a quintal respectively.

Similarly, the prices of November and December futures of pepper too closed at a higher end. November futures closed at Rs 10,730 a quintal, up Rs 196. December pepper futures jumped to Rs 11,000 from the last week's closing price of Rs 10,754 a quintal.

Interestingly, last week had seen a decline of over 14 per cent for chilli and pepper for both the months.