Sebi bars 16 commodities trading members and clients from dealing in the securities market

The Securities and Exchange Board of India( Sebi ) has barred 16 commodities trading members and clients from dealing in the securities market for indulging in fraudulent and manipulative activities in the matter of trading in castor seed contracts in NCDEX Some of the members barred by the regulator include Leo Global Commodities Investmart Commodities and Neer-Ocean Multitrade among others.Last month,after National Commodity and Derivatives Exchange had suspended trading in castor seed contracts,Sebi undertook preliminary examination for the period January 1,2016 to January 27,2016.During this period,castor seed February 2016 contract at NCDEX fell by around 20% as against around 14% fall in spot prices.Besides, the futures prices of castor Seed contracts touched lower circuit of 4% and 6% on January 25 and 27 respectively.Sebi's investigation also revealed that on January 25,one of the commodities trading members--Mid India Commodities ,who had large positions, expressed inability to collect Mark to Market (MTM) pay-in obligations from three of its clients, and asked the exchange to square off their positions. Further, on January 26 and 27,three other members--Neer-Ocean Multitrade, Investsmart Commodities and Leo Global Commodities also expressed inability to collect MTM pay-in obligation from their clients and requested the exchange to square off their clients' positions."On examination of daily margin shortages/delays with regard to payment of MTM obligations of above mentioned four Commodities Trading Members, it was noticed that there were continuous shortages/ delays on part of all four Commodities Trading Members in paying their obligations during the examination period,"Sebi said in a late evening order on Wednesday.It's the regulator's first order after it started regulating the commodities market.The regulator had also alleged that the defaulting clients were collectively holding 62.48% of open position in February 16 contract of castor sedd which in value terms were about Rs 5400000000."Such highly concentrated position in castor seed contracts by defaulting clients of these four members coupled with their inability to pay MTM obligations has potential to disturb market equilibrium and harm market integrity and poses systemic risks to the functioning of the market as much as it has interfered with market forces," Sebi said.