India’s Financial Technologies, which controls the nation’s biggest commodity exchange, tumbled 42 percent after a subsidiary suspended trading in some contracts.

August 1, 2013 Leave a comment

Financial Technologies Plunges Most in 15 Years: Mumbai Mover

Financial Technologies (India) Ltd. (FTECH), which controls the nation’s biggest commodity exchange, sank the most in more than 15 years after a subsidiary suspended trading in some contracts.

Financial Technologies tumbled 42 percent to 313.95 rupees at 9:57 a.m. in Mumbai, its biggest decline since December 1997. Unit National Spot Exchange Ltd. halted trading in some contracts, merged the delivery and settlement of all others and deferred them for a period of 15 days, it said in statement yesterday. Trading in its dematerialized contracts will continue, the company said.The suspension means volumes at the National Spot Exchange, where farm commodities and metal are traded, will drop, according to Arun Kejriwal, director at Kejriwal Research & Investment Services Pvt. The bourse accounted for 56 percent of Financial Technologies’s profit in the year ended March 31.

Financial Technologies’s “revenue will get hit, and ultimately profit also,” Mumbai-based Kejriwal said. “There appear to be some problems between the regulator, the government and the owners, which led to the suspension.”

Multi Commodity Exchange of India Ltd. (MCX) in which Financial Technologies holds a 26 percent stake, fell 13 percent to 558 rupees, its biggest drop since its March 2012 listing. The benchmark S&P BSE Sensex rose 1 percent.

Financial Technologies’ profit fell 14 percent to 2.27 billion rupees in the year ended March 31. The company said it will host a press briefing before canceling the event.

The suspension were “undertaken due to certain abrupt structural changes in the marketplace,” National Spot Exchange said in the statement. The changes “have disrupted the market equilibrium as volumes on the exchange have gone down significantly.”

The exchange shall announce a revised settlement calendar and contracts due for settlement after this 15-day period, the release said.

To contact the reporters on this story: Rajhkumar K Shaaw in Mumbai at rshaaw@bloomberg.net; Swansy Afonso in Mumbai at safonso2@bloomberg.net

Last updated: August 1, 2013 12:57 pm

Indian commodity exchange investigated

By James Crabtree in Mumbai

Shares in Financial Technologies, an Indian bourse operator, dropped by more than 60 per cent after its National Spot Exchange Limited commodity exchange suspended trading on most contracts following a government investigation.

Financial Technologies operates NSEL, India’s largest spot commodities exchange, alongside Multi Commodity Exchange, the country’s leading general commodities bourse.

In a statement on Wednesday evening, NSEL, which offers spot contracts in a variety of agricultural goods and metals, said it had suspended trading “in view of the grave emergency that has emerged in the market”.

NSEL said the suspension followed an investigation by India’s Department of Consumer Affairs relating to concerns over longer-term forward contracts offered on the exchange, rather than traditional short-term spot contracts.

Chief executive Anjani Sinha said that the exchange faced outstanding liabilities of Rs55bn ($911m), but that it held a physical stock of commodities worth Rs62bn, that it could sell if needed.

Market observers said, however, that the sharp fall in Financial Technologies’ share price reflected concerns that the organisation may not be able to meet its outstanding obligations.

The head of one Mumbai-based brokerage, speaking on condition of anonymity, said: “There is no systemic risk from this, because it is a small part of the overall market, but the worry is that there is inadequate collateral to cover the outstanding trades.”

Jignesh Shah, chairman of Financial Technologies, said: “We are confident that NSEL will resolve the situation within the contours of its bylaws and rules.”

Financial Technologies is one of India’s fastest growing market operators, gaining particular prominence this year when its Multi Commodity Exchange of India subsidiary launched MCX-SX, the country’s third equities bourse.

Shares in Financial Technologies dropped 64.5 per cent to Rs191.65, while MCX fell 20 per cent to Rs510.5.

Shreekant Javalgekar, chief executive of MCX, said: “There will not be any impact of NSEL’s circular on the operations and financials of MCX.”

Filed under Investing Process, Macro Trends

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