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Capital and commodity market regulator SEBI has banned four trading members and 12 of their clients from trading on commodity markets for rigging castorseed contracts on the NCDEX.
The exchange suspended trading in castorseed contracts on January 27 and cash settled all outstanding positions.
The suspended entities include Mid India Commodities, Neer-Ocean Multitrade, Investmart Commodities, Leo Global Commodities, Stride Multitrade, Vijay Saraf, Sisne Polymers, Ruchi Global, Bharat Foods Co-operative, Tanisha Multi Trading, Anju Jain, Piyali Trading, Vartika Mercantile, Secunderabad Oils, UKS Oils and Narsinpuria Korodimal.
Last month, SEBI said Mid India Commodities, which had large positions, expressed inability to collect Mark to Market (MTM) pay-in obligations from three of its clients and asked the exchange to square off their positions. The following day three other members – Neer-Ocean Multitrade, Investsmart Commodities and Leo Global Commodities – also expressed their inability to collect margin from their clients and told the exchange to square off their clients’ positions. The open position of the defaulting clients was about ₹540 crore. It was observed that defaulting clients were collectively holding 62.48 per cent of open position in February contract of castorseed valued at about ₹540 crore and on one fine day all of them failed to pay margins. It is also noted that the positions collectively held by these clients is about 10 per cent of annual production of the entire country.
Rajeev Kumar Agarwal, Whole-time member, SEBI, in his order said commodities trading members are the first level gatekeeper and have direct visibility to the risk profile/ financial health of the client and must take precautionary steps to maintain market integrity. Rather, it has been noted that Mid India Commodities had defaulted in its proprietary account, as well, he said.
The act and omissions of the defaulting clients, not only disturbed market equilibrium but also indicate manipulative and fraudulent design to maintain the price to benefit the position they were having in physical market.
The banned entities can file their objections within 21 days and seek personal hearing with SEBI, the order said.
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