5 questions to brokerages crying foul over NSEL

When the govt doesnot bail out retail investors why should it devaite in case of NSEL

The broker community on Tuesday came together to accuse NSEL. They also suggested that MCX and FT, along with NSEL should be taken over by the government. They have also asked 10 question to NSEL, FT & MCX and even the government. Here are five questions for the brokerages.

1) Why were brokers selling the commodities forwards contract on the NSEL (a spot exchange) to their investors as a lucrative investment product?

2) Brokers are complaining that the exchange does not have the stock (of commodities) that was promised to them. If the commodities, say 1 million tonne of basmati is offered to them, are they willing to take it?

3) Weren’t they aware that by buying forward contracts on the NSEL, which were trading at a huge premium to actual market prices, they were actually stoking inflation by artificially increasing price of commodities in the forwards market?

4) Why should the government bail out brokers if their investment recommendations have gone awry? The government does not bail out retail investors when the stock market falls, or if a company goes under, or banks mis-sell a product.

5) If FT, MCX and other companies should be taken over by the government, shouldn’t United Spirits also be taken over? After all, group company Kingfisher Airlines has defaulted and not even paid employees.

Disclaimer: I have never met Jignesh Shah personally or professionally. I have no liabilities with NSEL, FT or MCX. I don’t own any shares in any of the listed companies of the FT Group.