The Department of Consumer Affairs nominated the Forward Markets Commission (FMC) to provide oversight over spot exchanges. The FMC communicated this to NSEL and required them to submit fortnightly reports. However, the DCA issued a show cause notice to NSEL in 2012 regarding some contracts. NSEL responded to the notice but the DCA took no action for over a year. Then in 2013, the DCA suddenly asked NSEL to stop issuing new contracts without explaining their reasons, disrupting trading.

2.  Department of Consumer Affairs, MCA, Food
& Public Distribution, Government of India
wrote to the Chairman, FMC stating as
subject “Regulation of National Spot
Exchanges” & as text that “the competent
authority has decided to nominate the FMC as
a designated agency for providing ‘oversight
over the spot exchanges’...”.

3.  FMC wrote to DCA for RBI to consider to write
to the government
 They wrote to exempt spot exchanges
regulated by FMC from purview of Payment &
Settlement Systems Act, 2007
 It had also mentioned that spot exchanges
would be substantially regulated by them

4.  In this letter issued by FMC to the MD, NSEL
 It was communicated that FMC was
nominated as a designated agency for
providing oversight over the spot exchanges
 Further they added that exchanges would be
required to forward a return on a fortnightly
basis to the Commission

5.  Despite all this, DCA issued a Show Cause
Notice to NSEL on 27th April 2012
 Notice was in regard to trading of certain
contracts marketed by brokers
 NSEL provided a detailed explanation soon
after vide its letter dated 23rd May 2012
 And on 11th August 2012, NSEL provided a
further follow up reply

6.  Thereafter, for more than a year, there was
no response of any sort from FMC
 In between, NSEL was regularly reporting to
the FMC on various aspects of exchange
operations
 Reports were including submission of
detailed statements on fortnightly basis

7.  All of a sudden in July 2013, DCA asked NSEL
to stop issuing fresh contracts
 All this shows how DCA/FMC had no material
reason to stop trading of certain contracts
 It jeopardized the smooth flow of trading &
disrupted the settlement system