The recent noise, argument or confusion  in the Indian markets has created fear amongst the market participants. The story goes like this. National Spot Exchange Ltd (NSEL) had to suspend some contracts under the direction of Forward Markets Commission (FMC). It is alleged that NSEL extended settlement dates of the contracts and also permitted selling of goods that traders didn't have in their warehouses. It may be noted that NSEL is a platform where traders trade commodities. However, delivery is compulsory in this case. Thus, any trader who has sold any contract needs to have the goods located in his warehouse. This is to ensure that delivery is done at the requisite date. Failure to do so can result in default.

Inability by NSEL to oversee that its members had the goods required for delivery resulted in cancellation of many contracts for the fear of default. While there is an ambiguity over this entire issue relating to cancellation of contracts, it is clear that regulatory policies were inept. Both government and FMC are indulging in blame game citing that none of them is the regulator of NSEL.

The real losers in this entire episode have been investors. The stock of Financial Technologies, the parent firm of NSEL, dropped 76.2% in the last 8 trading sessions. It's high time that risk management and regulatory policies are given due importance in India. Else investors will continue to be a scapegoat in this entire blame game.