The Securities and Exchange Board of India (SEBI) has sought details from brokers about their direct and indirect exposure to the National Spot Exchange Ltd. (NSEL), even as shares of its listed group entities Financial Technologies and MCX continued to bleed for the second straight day. The regulator is also seeking to ascertain that the brokerage firms and individual brokers have put in place effective ‘Chinese-wall’ like structure to ensure that the problems in spot commodity markets do not spill over to the equity and other segments.
According to sources, SEBI wants the brokers to ensure that their exposure to NSEL are secured by sufficient collaterals and any problems on that front do not affect the liquidity position for their brokerage operations in equity, currency and other segments. NSEL, which offers an electronic platform for spot market trading in various farm commodities as also bullion contracts, has suspended trade in almost all its products.
While the exchange has said it would meet all its payment and settlement obligations, its decision to defer the settlement to a 15-day period has raised concerns about potential payout defaults. As many brokerage firms trading on the NSEL platform are also present in other segments such as equity, currency and derivative markets, any payout default at NSEL could lead to collateral damage in various segments of the capital markets that are regulated by SEBI.