Markets regulator Sebi has cancelled registration certificates of Joindre Commodities Ltd and Pragya Commodity Brokers Pvt Ltd for failing to satisfy the “fit and proper” standards by permitting their shoppers to commerce in unlawful contracts on National Spot Exchange Ltd (NSEL).
The brokers had been members of NSEL and had facilitated buying and selling in paired contracts on the NSEL platform.
In September 2009, NSEL launched the idea of “paired contracts” on its platform, which concerned shopping for and promoting the identical commodity by two totally different contracts at two totally different costs whereby traders may purchase a brief period settlement contract and promote an extended period settlement contract and vice versa, with the identical counterparty on the similar time, the regulator famous in separate orders handed on Friday.
Such contracts had been “ex facie illegal” and NSEL was in impact operating a financing transaction assuring a hard and fast rate of returns below the garb of paired contracts.
Conditional exemption was granted from the provisions Forward Contracts (Regulation) Act, 1952 for ahead contracts of one-day period on the market and buy of commodities traded on NSEL and the situations positioned an absolute bar on quick gross sales and stipulated that each one excellent positions on the finish of the day, should end in supply of commodities.
However, Forward Markets Commission discovered that 55 contracts supplied for commerce on NSEL had been with settlement intervals exceeding 11 days and all such contracts traded on NSEL had been in violation of FCRA and the situation that no quick sale by members of the alternate shall be allowed was not being met by NSEL.
Since Joindre and Pragya Commodities had been members of the NSEL and had participated in / facilitated buying and selling in paired contracts on the NSEL platform, Sebi initiated enquiry proceedings towards them and appointed a chosen authority to investigate into whether or not they had been ‘match and correct’ to proceed to carry the certificates of registration as Trading and Clearing Member.
Designated authority concluded that they weren’t “fit and proper” in phrases of stock dealer laws and intermediaries laws and that the registration granted to them as commodities derivatives dealer be cancelled.
“The Noticee by allowing its clients to trade paired contracts which were ex facie illegal, as noted above, and that too for a period of over two years, has failed in conducting its business in conformity with the standards expected to be maintained by registered securities market intermediaries,” Sebi mentioned in equally worded separate orders.
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