Throughout, the FMC maintained that the crisis emerged out of a warehousing problem. In reality, the FMC was provided periodic (fortnightly) information on the stock of commodities held in the
warehouses by the executive management of NSEL. The MD & CEO had repeatedly assured that stock position was comfortable. Even after the crisis, the MD & CEO made public statements that the stocks in the warehouses were more than the value of the settlement. Trading members of NSEL belonging to the public sector have conducted separate inspection of the warehouses, on select basis, through CAG approved auditors and found no shortages or lapse in the warehouses. Additionally, brokers also have visited warehouses nearly 50 times over a 36 month period to confirm stock positions and raised no concern. NSEL statutory and internal audit reports, periodically brought out, also found no deviance or deficiency in this regard. When all these measures have never raised any red flag over the stocks in the warehouses, blaming the NSEL Board and FTIL for missing stocks and attributing motives is plain unjust and unfair. Thus, the action being initiated against the non-executive members of the NSEL Board, FTIL and the promoters of FTIL are not justifiable in this context.
In a meeting FMC held with all the players on August 4, 2013, it was assured by the brokers and The
Defaulters that the money and stocks relating to trades remained adequate. The situation however
drastically changed thereafter. There could be a possibility that once the Government caused sudden
stoppage of business, some of the defaulting members with a view to protect their positions might
have migrated the stocks from the designated warehouses. This further accentuated the liquidity
position leading to default in the settlement. The possibility of banks cutting off their credit lines
without the stocks in place might also have induced them to shift the stocks out of the warehouses.
Such a scenario could be expected in any financial markets business and not just in NSEL. Sudden
stoppage of business will create panic in the market that will lead members to try to get away from
the responsibility and obligations, which happened in the case of NSEL also.
warehouses by the executive management of NSEL. The MD & CEO had repeatedly assured that stock position was comfortable. Even after the crisis, the MD & CEO made public statements that the stocks in the warehouses were more than the value of the settlement. Trading members of NSEL belonging to the public sector have conducted separate inspection of the warehouses, on select basis, through CAG approved auditors and found no shortages or lapse in the warehouses. Additionally, brokers also have visited warehouses nearly 50 times over a 36 month period to confirm stock positions and raised no concern. NSEL statutory and internal audit reports, periodically brought out, also found no deviance or deficiency in this regard. When all these measures have never raised any red flag over the stocks in the warehouses, blaming the NSEL Board and FTIL for missing stocks and attributing motives is plain unjust and unfair. Thus, the action being initiated against the non-executive members of the NSEL Board, FTIL and the promoters of FTIL are not justifiable in this context.
In a meeting FMC held with all the players on August 4, 2013, it was assured by the brokers and The
Defaulters that the money and stocks relating to trades remained adequate. The situation however
drastically changed thereafter. There could be a possibility that once the Government caused sudden
stoppage of business, some of the defaulting members with a view to protect their positions might
have migrated the stocks from the designated warehouses. This further accentuated the liquidity
position leading to default in the settlement. The possibility of banks cutting off their credit lines
without the stocks in place might also have induced them to shift the stocks out of the warehouses.
Such a scenario could be expected in any financial markets business and not just in NSEL. Sudden
stoppage of business will create panic in the market that will lead members to try to get away from
the responsibility and obligations, which happened in the case of NSEL also.
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