The Forward Markets Commission has found the National Commodity & Derivatives Exchange Ltd guilty of violating settlement price norms for the channa and urad January 2006 contracts and has directed the exchange to relieve a senior executive of his duties.
Without naming the executive, the commodities market regulator on Friday said, "He should not be allowed to look after any core functions of the exchange."
It also added that this did not preclude action against other members of the management team of the NCDEX.
On January 19, the NCDEX set a final settlement price for channa and urad for the January 2006 contract on the basis of the average of polled prices of the preceding five days, including the expiry day. This is against the practice, which takes the final spot price on the expiry date as the settlement price.
NCDEX executives could not be contacted as they were holding an internal meeting to take stock of the situation.
An NCDEX spokesperson said, "The outcome of the meeting will be known tomorrow." It not clear whether the NCDEX will file an appeal against the FMC decision.
The regulator has directed the NCDEX to conduct an inquiry to find out whether any mala fide intent was involved in the decision on changing the method of the final settlement price.
The regulator wants the probe completed within a month.The FMC has also directed the exchange to investigate and report within a fortnight if there was any manipulation of the futures market because of this.
The FMC has also directed the exchange to find out if any attempt was made to rig the spot prices by the members of the exchange. NCDEX also asked the FMC that any person found responsible for rigging the spot prices be brought to its notice within a fortnight.
The regulator has also asked the exchange to immediately identify deficiencies in compliance systems, the process for setting spot rates and the final settlement price, and delivery systems.