A complex instrument

This refers to ‘MF’s trade in credit default swaps, a good move’ (June 14). Credit default swaps (CDS) are complex derivative products that, if not used prudently, can lead to financial turmoil. The 2008 mortgage crisis is a classic example of this risk. The level of risk that the buyer of a CDS is exposed to depends on the rating of the quality of assets of the underlying institution, which is determined by rating agencies. If these ratings are not accurate, it can lead to default risk for the seller. Allowing mutual funds to trade in CDS increases the interconnectedness of various institutions through these contracts, meaning the failure of one institution could lead to a cascade of failures in the system. The lack of significant market in CDS was one of the main reasons India was not significantly affected by the chain of defaults during the 2008 mortgage crisis.

Srinivasan Velamur


Agenda for Naidu

With reference to the editorial, ‘Man of the moment’ (June 14), the new AP government lead by Chandrababu Naidu has the uphill task of completely revamping the State whose exchequer is in a shambles. Apart from the huge capital expenditure proposed for re-building Amaravati as a world-class capital and completion of the giant hydel power project which stopped abruptly, so many complex issues are awaiting resolution. Most of the urban and rural areas in the State lack basic amenities like drainage facilities, drinking water and proper roads besides erratic supply of power. Towards funding the various projects, the State could look to crowd-funding and public-private JVs in all the major capital expenditure plans. To attract foreign investments a provision for setting up a GIFT city at Vizag may be planned and the city should be developed as a major IT hub.

Sitaram Popuri


Curb F&O trading

SEBI had recently expressed concern over the spurt in futures and options trading. For every individual who makes some money there are thousands and thousands of those who lose it. Instead of discouraging such trading, there are many so-called analysts on mainstream TV channels actually encouraging it by offering how to make money by following their advice. The impunity with which they get away, causing heavy losses to retail traders, cannot be condoned. Monthly settlements, as was the practice earlier, could help curb this form of trading.

Anthony Henriques


NEET issues

This refers to ‘74 students have scored 100% in NEET-UG since inception, a whopping 67 in 2024’ (June 14). It cannot be a coincidence that as many as 67 students have topped the exams and on top of it six students from the same centre did it. There is definitely more to it than meets the eye.

During the exams we witnessed how one racket was busted, wherein a whopping ₹25 lakh was charged from students to provide proxy candidates to take the exams. Some students complained that even after having scored 650 out of 720 marks they were not getting admission into any of the reputed colleges. So there are a series of anomalies which must be addressed and investigated thoroughly by National Testing Agency.

Bal Govind