 "Stock is sufficient to cover overall exposure: Anjani Sinha")
Lot of controversy followed yesterday’s decision of the national spot exchange of India. Anjani Sinha, MD & CEO of the exchange spoke to Rajesh Bhayani to clarify the issues and exchange’s stand.
How are you equipped to tackle the situation if there are wide scale defaults takes place as feared after yesterday’s exchange’s decision to suspend trading?
The total exposure of market participants is covered by the physical stock of commodities, the current value of stock held by the exchange is 6,200 crore. The exchange also has a settlement guarantee fund of Rs.800 crore. Against this exposure to the system is around Rs 5,400-5,500 crore which will be due for a settlement over a period of next one- one-and-a-half month. Therefore, that way stock is more than sufficient to cover the overall exposure, in fact there is nothing to worry for the participants or members or clients.
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Doubts are being raised about actual stock with the exchange in some quarters. How will you prove it?
Warehouses have physical stock and that can be verified. We have told participants to verify that earlier also and many participants do verify that. All stock is audited and certified by the independent auditors.
How have been the brokers positions on the exchange?
Half of the trading the exchange is by brokers on their proprietary books and rest is on behalf of clients. We have mechanism to differentiate them.
But due to postponement of settlement will it not affect the concerned brokers position in other markets?
These positions are not a leveraged position like in derivative markets and hence this normal. Broker’s do commodities and other markets business under different companies and hence we don’t see such possibilities.
If money against the exposure of buy position does not come than?
Right now we have this stock. That will be liquidated over a period of time in case there is any default. Right now, there is no default so we have not liquidated any stock but in future in the process of the settling, if we have to liquidate the stock then we will do that.
When will you start making payment to sellers? Will you wait for full 15 days?
There is the process that we are following. We are not saying that it will happen only after 15 days. Rather this 15 days period is required for the purpose of conducting auctions if any and settlement and all. The entire amount is not required to be auctioned. in case there is a difference and only in case person is not able to pay for the spot buying. Otherwise, if people keep on paying, we will keep on declaring payout. We will start making payments from next week onwards.
One fail to understand why you have to suspend trading when you had enough leg room to settle contracts without actual default taking place?
The reason is that when we got the directive from Ministry of Consumer Affairs that we should not launch any fresh contracts and existing contracts should be settled on due date after that we submitted our undertaking. We have also clarified that we will be converting all the existing contracts into T+10, so there is no ambiguity relating to delivery period.
Our expectation was that market will take it in the same manner, all participants will participate and there will be no disruption in the market but because of this regulatory issue still a lot of people have not participated. They feel that there should be some clarification coming from department that there is no issue relating to T+10 contracts. If such clarification comes then function levels will be restored and market will resume in the same manner.