What is so scary about the NSEL case?

Well most people are afraid that the shortfall will be very high and the clients (brokers, investors) will not get paid in full…or even partly.

Well whose money is at stake?

About 15,000 investors and 3 big brokers – Indiainfoline, Motilal Oswal, and Anand Rathi.

Will this create a settlement problem in the NSE (National STOCK exchange) and the BSE?

No. Both those exchanges have enough margins and settlement funds. No worry on that count.

What is the scare?

3 big brokerages will be sued by their clients and a lot of this money could be Prop funds.

So what does it mean?

Nothing. Lots of legal fight, a crippled balance sheet, agitating clients, loss of jobs and tremendous loss of scale for the 3 big retail brokers.

What happens if they have only ‘brokered’ the transactions?

Then these brokers, well legally, do not have to pay, so they will not. Well the legal position is not very clear..but for big brokerage firms client reputation risk may be the only thing at stake…not really a legal stake..so the clients may have to go penniless or wait permanently.

Is this already priced into the markets?

Difficult to say. Partially yes, fully maybe not. So the markets could see a fall…

What other implications?

The withdrawal of demat delivery for commodities will kill the volumes of MCX and create a mess even in gold and silver settlements.

If I am a holder of gold and silver in E form from NSEL, should I worry?

Frankly I have no clue….

What will you do if NSEL’s assets are attached?

Is it a scary situation?

Yes

Is it a sad situation?

Yes….it is an action replay of Harshad, Ketan and Home Trade,….no clue whether the underlying assets exist. Time and again ……..

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