Finding them guilty over irregularities in the trading of guar seed and guar gum largely on the National Commodity & Derivatives Exchange (NCDEX), the Forward Markets Commission (FMC) is considering banning two Rajasthan-based traders for at least six months. Based on the gravity of the offence, the suspension can be granted for even one year also.
Responding to the FMC’s show cause notices, the two traders had sought some time to appear before the regulator for defending their cases. The regulator heard their cases in the second week of January this year.
“We were not fully convinced with their responses and hence, decided to suspend them from active participation from commodity trading. Exact periodicity is being worked out which will be announced soon,” said a senior FMC official.
The action assumes significance, as the commodity derivatives market regulator has already banned two brokers Shresth Commodities & Financial Services Pvt Ltd (SCFS) and Vinod Commodities Ltd (VCL), the two Rajasthan – based traders for alleged manipulation of guar seed and guar gum prices. While SCFS, a MCX, NCDEX and ICEX member, has been suspended for six months, VCL, a member of MCX, NCDEX and ACEL was terminated for one year.
While passing the order on January 20, the FMC said, “Subhash Jain, director of SCFS is hereby prohibited from entering into any forward contract for sale or purchase in his own name or through another member of recognized associations of any goods or class of goods.”
In another order the same day, the regulator said, “Vinod Singhvi, director of VCL, is prohibited for one year from entering into any contract for sale or purchase of any goods in his name or through another member.”
In absence of adequate supportive evidences for proving the alleged manipulation in the price of the aforesaid narrow commodities, the regulator may exonerate one trader.
“Barring a couple of earlier transactions, we did not find any unusual transaction done by one trader and the representative of that trading company provided satisfactory answers. Following that we decided to take no concrete action against them,” said the official.
Around three dozen traders were active allegedly in manipulation of guar seed and guar gum prices. Of which four were found guilty when the separate teams of FMC officials and NCDEX executives investigated their books of accounts until early this month. Another 30 traders, however, were set free with reportedly with a mere warning.
According to the FMC official, these traders were also involved in frequent client code modifications (CCM).
FMC fears the possibility of margin funding in these cases where some industrialists and large traders transfer the money into the account of a small and unnoticeable person and trade commodities on his behalf. Traders manage to corner huge quantity of guar gum and seed through different account for price rigging in future while the person gets a small sum as margin for allowing use of his account for transferring the amount.
