NSEL appoints new independent directors

Mumbai: National Spot Exchange Ltd. (NSEL), which is in the midst of a Rs5,574.35 crore payment crisis, on Wednesday named five new independent directors—Uttam Prakash Agarwal, Amarendra Sahoo, Niraj Gupta, Subramanya Kusnur, and Varghese Jacob—and Ashok Nag as a non-executive director.

The board of NSEL, which is promoted by Financial Technologies (India) Ltd. (FTIL), on 19 August sacked it key management team headed by Anjani Sinha after the settlement crisis. NSEL had on 17 September appointed Saji Cherian as its managing director and chief executive officer.

The settlement crisis at NSEL came to light on 31 July when the exchange abruptly suspended trading in all but its e-series contracts. These, too, were suspended a week later. The closure of trading may have been prompted by an instruction from the ministry of consumer affairs to the exchange asking it not to offer futures contracts. A spot exchange isn’t supposed to do so, but NSEL was doing that.

NSEL tried to implement the change, but because its appeal was to investors and members who were not interested in spot trades, it eventually had to suspend all trading. It later emerged that all trading on NSEL happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity.

The entities selling on spot and buying futures were planters or processors and members of the exchange. It turned out there were only 24 of them, and they used the paired contracts as a way to raise easy money. When the trading was suspended, the investors were left holding contracts that the members couldn’t buy because they didn’t have the money to do so.

On 14 August, NSEL proposed a payout plan, but it has been unable to stick to the schedule and has not made a single successful payout ever since.