Farm Trade Halt by Bourse Triggers Financial Technologies Crash

Financial Technologies (India) Ltd. (FTECH), which controls the nation’s biggest commodity futures exchange, lost more than half of its value after a subsidiary that runs a spot bourse suspended trading in some contracts.

Financial Technologies tumbled by a record 65 percent to 191.65 rupees at the close in Mumbai, with volume 91 times the daily three-month average. The National Spot Exchange suspended some contracts, merged the delivery and settlement of all others and deferred them for a period of 15 days, it said in statement yesterday.

Volumes at the NSEL, where farm commodities and metal are traded, will plummet, according to Arun Kejriwal, director at Kejriwal Research & Investment Services Pvt. in Mumbai. The bourse contributed 56 percent to Financial Technologies’s net income in the year ended March 31.

“Turnover on NSEL may drop by more than half,” Badruddin Khan, a vice president at Indiabulls Commodities Pvt., said in an interview. “Some clients may shift to other exchanges like NCDEX Spot Exchange as there’s uncertainty about trading and settlement rules on the NSEL. There will be panic.”

Multi Commodity Exchange of India Ltd., India’s biggest commodity futures bourse that’s 26 percent owned by Financial Technologies, fell by the 20 percent limit to 510.55 rupees, the most since its debut in March 2012. The suspension won’t effect its operations, MCX said in a filing. The S&P BSE Sensex lost 0.2 percent, erasing an intraday gain of 1.2 percent.

‘Market Equilibrium’

The halt followed “certain abrupt structural changes in the marketplace,” NSEL said in the statement. Those changes “have disrupted the market equilibrium as volumes on the exchange have gone down significantly.”

National Spot Exchange accounts for more than 98 percent of India’s electronic spot market in commodities, according to its website. Physical raw-material bourses operate separately from futures exchanges in the country.

“The exchange is not facing a liquidity crisis,” Anjani Sinha, the chief executive officer of the exchange said in an interview to Bloomberg TV India today. Trading was suspended after the government raised some concerns and will resume after all contracts are settled, he said without elaborating.

The National Spot Exchange overstated the amount of castor seed inventories at its warehouses, the Economic Times reported on July 19. The exchange denied the allegation, according to a statement on the company’s website.

Financial Technologies’ profit fell 14 percent to 2.27 billion rupees in the year ended March 31.

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

To contact the editor responsible for this story: Michael Patterson at mpatterson10@bloomberg.net

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