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NSEL’s Scam – A Spotlight on Regulation of Electronic Spot Exchanges
Background
NSEL’s operations were mainly intended to help the agricultural participants in India to overcome the challenges they faced. Before introducing the concept of Electronic Spot Exchanges (ESEs), producers (farmers) and consumers (individuals, traders, processors, exporters, and importers) of agricultural products were unable to sell and purchase agriculture products at efficient prices. In India, agricultural markets are widely scattered across different states and are governed as per the regulations framed by the respective state governments. It was a challenging task to provide a nationwide integrated platform which would help farmers and the traders to initiate a trade process by comparing the market prices of different products across various agriculture markets (Agriculture Produce Market Committees) in the country. |
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After a thorough analysis of various possibilities, the governments at the central and state levels came forward to allow private players to test and launch the operations of an Electronic Spot Exchange (ESE). They were allowed to transact their business operations as per the regulations laid down in the Forward Contract (Regulations) Act, 1952 (FCRA), and also in compliance with the regulations framed by each state government . Out of the three players who were granted permission (FTIL, NCDEX , and NMCE ), two players (FTIL and NCDEX) provided electronic spot trading services. ...
