Auditor to probe concentration of sell trades in February contract

MUMBAI: The external auditor that commodity exchange NCDEX appoints to probe the castor fiasco will investigate, among others, why there was a concentration of sell trades by certain clients and members in the February contract despite it having traded lower to the subsequent contracts running through May, and to the castor spot rate.


The firm will also investigate if certain entities were trying to “jack up” the price on the bourse. “The auditor will examine trading patterns of broker members and their clients in the castor counter,” said a person aware of the development.

“The firm will investigate why certain sellside trades were being concentrated in the near month when far months were quoting at a premium to it, whether a tussle was brewing between certain cartels, whether any participant set up benami companies to trade and boost the price, in the run-up to the ban.” Samir Shah, CEO, NCDEX, declined to name the auditor or elaborate on the terms of reference.

Participants who deposited castor stocks in NCDEX accredited warehouses for delivery and arbitrageurs have been deeply distressed by the overnight ban on castor futures.

Some of them privately question the exchange’s defence of a ban when its surveillance and risk management system could have “easily” detected an unusual build-up of buy or sell trades and when preemptive measures like raising margins for additional collateral to prevent default in meeting M-T-Mobligations.