Grappling with its biggest ever scam running into Rs 5,600 crore, it appears to be a journey down the hill for the commodity markets with total exchange traded turnover halving to almost Rs 65 lakh crore in 2014.
Although not a formal member of the commodity futures market, the payment default at National Spot Exchange Ltd (NSEL) shook the market to its core, resulting into a series of regulatory steps to revive investor confidence and credibility during 2014 and it is now hoping for a fresh start in the new year.
As a result, the total turnover appear to be falling to around Rs 65 lakh crore, almost half of Rs 123 lakh crore clocked in 2013, although the industry players and regulator FMC are hopeful that “the worst is over”.
“Bright days are ahead for the commodity market as the confidence and credibility, which was shaken up due to the NSEL scam, has fully been restored now,” Forward Markets Commission (FMC) Chairman Ramesh Abhishek told.
In 2014, the regulations were tightened for promoter and shareholders of the exchanges, warehouse facilities were strengthened, ban was lifted on tur, urad and rice trade, while exchanges were allowed to launch forward trading to bring effective price discovery and efficiency in physical markets.
Going ahead, the FMC chief said that the focus would be on increasing depth of the market and quality trade volumes, and is in talks with RBI to allow more market participants like FIIs and banks in the commodity market.
On major milestones achieved in 2014, the FMC said that “the biggest achievement of the year was that we have initiated measures to ensure investors get back their money from the National Spot Exchange Ltd (NSEL), promoted by FTIL.”
A strong message was sent to the industry by ensuring Financial Technologies India (FTIL) implement the FMC’s December 2013 order that declared the company unfit to run any exchanges, it said. FTIL exited completely from MCX, MCX-SX and other exchanges in India and abroad.
FMC chief said: “All uncertainty and regulatory issues that were there have all been resolved. Post NSEL crisis, there is better regulation, more depth and participation.”