Every student of Finance and Economics is repeatedly told that credit risk or counterparty risk is much less when we deal in exchange traded products rather than over the counter contracts. Though theoretically true, this proposition assumes that the exchange is properly regulated.
The ongoing fiasco at National Spot Exchange Limited is an eye-opener for regulators. It conveys a strong message that exchanges do not mitigate credit risk unless its operations are transparent and efficient. It is hoped that SEBI will conduct a detailed enquiry and publicise the learning points. This is not the time for a turf war between SEBI and FMC. The guilty must be exemplarily punished because otherwise other exchanges also will become slack.
The ongoing fiasco at National Spot Exchange Limited is an eye-opener for regulators. It conveys a strong message that exchanges do not mitigate credit risk unless its operations are transparent and efficient. It is hoped that SEBI will conduct a detailed enquiry and publicise the learning points. This is not the time for a turf war between SEBI and FMC. The guilty must be exemplarily punished because otherwise other exchanges also will become slack.
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