Academic year-2015-16

Presents : Khyati Daxini-09 Pranjal Gawde-11

Ketan Gohil-14 Rohan Khatri-17

SYBMS(SEMESTER 4)

EQUITY AND DEBT MARKET Divyesh Godhaniya-13

NATIONAL SPOT EXCHANGE LTD. SCAM

WHAT IS SPOT EXCHANGE

• National spot exchange ltd is trading or a buying and selling a commodity, paying cash for and receiving your goods on the ‘spot’. Which signifies that the buyer and seller agree on a price and ‘deliver’ their side of the contract immediately.

INTRODUCTION

• National Spot Exchange (NSEL) is a Commodities exchange in India, and is a joint venture of Financial Technologies (India) Ltd. (FTIL) and National Agricultural Cooperative Marketing Federation of India (NAFED). National Spot Exchange commenced its live trading operations in different commodities on 15 October 2008.

• Jignesh shah is the Vice Chairman of NSEL.• The NSEL scam is estimated to be a Rs. 5600 crore.

E- SERIES PRODUCT

• For the first time in India, National Spot Exchange has introduced MCX (Multi-Commodities Exchange) Retail investors can now trade and invest in commodities like they invest in equities.

• The E-Series commodities include: Steel, Sugar, Gold, Silver, Crude-Oil ETC.

WHO IS JIGNESH SHAH• Jignesh shah is the

founder and former CEO of the Multi-Commodity Exchange of India LTD. And co-founder , chairman and managing director of Financial Technology India LTD.

WHAT REALLY NSEL DID?

• The NSEL scam is estimated to be a Rs. 5600 crore (around US$ 0.9 billion) fraud that came out to light after the National Spot Exchange failed to pay its investors in commodity pair contracts after 31 July 2013. .

DAY 1• Sugar price = 100 +10%(+10)

DAY 2

• Sugar price = 80 -20%(-20rs)

DAY 3

• Sugar price = 81 +1%(+1rs)

DAY 4

• Sugar price = 85 +5%(+5rs)

1 MONTH LATER

THE ROLE OF BROKER

• The economic offence wing (EOW) of Mumbai police found evidence of some irregularities on the part of the broker in NSEL scam.

• The report mentions evidence of illegal of unauthorized changes at the back end of NSEL, where broker didn’t have any control.

• The EOW wing of Mumbai police arrested the top 3 brokers namely amit rathi, Chintan Modi, cp Krishnan on 3rd march 2015

ACTION

• Amit Mukherjee the Assistant Vice-President(business development) of NSEL was arrested by Mumbai police marketing the first arrest in the scam on 10th OCT 2013

• Jignesh shah along with trusted assistant Shreekant Javalgekar who were believed to be mastermind were arrested on 7th May 2014.

Effects of NSEL Fraud • As an effect on the NSEL fraud the share price of its

promoter company FTIL crashed by 60-70% result in massive erosion in the company market capital.

• The share prices of the company MCX(multi commodity exchange ltd) also decline.

• Jignesh Shah on 9 October 2013, had to resign from the board of MCX-SX stock Exchange.

The End of NSEL Scam

• First, on 16th July the contracts were cut to T+10. But that would involve too many pair trades – from one a month to three a month, each of which had higher transaction costs.

• On July 31, NSEL issued a circular saying all future contracts would be stopped.

• But because it didn’t get paid from the borrowers, it didn’t have the capacity to pay.

CONCLUSION

• The first lesson from the NSEL crisis is that if someone promises easy money, there must be something wrong somewhere.

• Investors must seek complete clarity when any product promises to give high returns for very long periods.

• There is nothing called a risk-free return if someone claims that he is giving more than bank fixed deposits.

THANK YOU