Where did FMC fail ? NSEL was made a target in the whole conspiracy

Department of Consumer Affairs, MCA, Food & Public Distribution, Government of India wrote to the Chairman, FMC stating as subject “Regulation of National Spot Exchanges” & as text that “the competent authority has decided to nominate the FMC as a designated agency for providing ‘oversight over the spot exchanges’...”.

August 2011

FMC wrote to DCA for RBI to consider to write to the government

They wrote to exempt spot exchanges regulated by FMC from purview of Payment & Settlement Systems Act, 2007

It had also mentioned that spot exchanges would be substantially regulated by them

5th August 2011

In this letter issued by FMC to the MD, NSEL It was communicated that FMC was

nominated as a designated agency for providing oversight over the spot exchanges

Further they added that exchanges would be required to forward a return on a fortnightly basis to the Commission

10th August 2011

Despite all this, DCA issued a Show Cause Notice to NSEL on 27th April 2012

Notice was in regard to trading of certain contracts marketed by brokers

NSEL provided a detailed explanation soon after vide its letter dated 23rd May 2012

And on 11th August 2012, NSEL provided a further follow up reply

DCA issued a notice

Thereafter, for more than a year, there was no response of any sort from FMC

In between, NSEL was regularly reporting to the FMC on various aspects of exchange operations

Reports were including submission of detailed statements on fortnightly basis

No response by FMC

All of a sudden in July 2013, DCA asked NSEL to stop issuing fresh contracts

All this shows how DCA/FMC had no material reason to stop trading of certain contracts

It jeopardized the smooth flow of trading & disrupted the settlement system

Conclusion