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Financial Tech Shares Gain 30%

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Shares of Financial Technologies, which owns a series of exchange platforms, gained over 30 per cent on Monday, 5 August, after the senior management proposed an “agreeable” staggered payment schedules for parties who defaulted on payments after punching trades on Financial Technologies’ subsidiary National Spot Exchange Ltd.

The exchange brokered peace between parties involved in the trades and hammered out a three-point settlement to meet outstanding payments worth Rs 5,600 crore on due contracts. As per the agreement, eight members, who dishonoured the contract, agreed to pay close to Rs 2,181 crore with immediate effect. Another 13 members have agreed to pay 5 per cent of the total dues every week, which after 20 weeks would add up to Rs 3,107 crore. Three other members have asked for more time to pay the remaining Rs 311 crore, said a Financial Technologies spokesperson.

“We’ve received assurances for over 95 per cent of the payment,” the spokesperson said.

As a second option, National Spot Exchange Ltd (NSEL) had asked non-payers to issue post-dated cheques amounting to Rs 4,900 crore against their settlement obligation.

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“While PDCs are a commitment, the payout process may not roll out smoothly in a month’s time. Hence, the market participants have proposed the first option (of staggered payments) as a safer alternative,” said a press note issued by NSEL.

NSEL, which is an electronic trading platform for buying and selling of metals and agri-commodities, ran aground after it issued a circular that reduced the settlement cycle to less than 11 days (T+10) and barred intra-day square-off facility. Till that time, the exchange had larger settlement cycle often extending upto four weeks in the case of rare agri-commodities traded on the exchange. When the cycle got shortened, the market could not adjust to the new payment schedule. This gave rise to a mammoth payment default situation, triggering a massive drop in the shares of Financial Technologies.

The stock fell over 79 per cent in two trading sessions, from Rs 584 on July 30 to Rs 120-levels at close on August 2. Financial Technologies shares ended trading at Rs 197.97 on the BSE on Monday.

“FT shares may gain some more in the short-term, but it is going to be a pure trading play. Investors should keep proper stop-loss while trading on the stock. A better buy at this juncture would be MCX shares as there is more value there. Financial Technologies, over a longer term, may have systemic issues,” said Kishor Ostwal, CMD of CNI Research, a stock research firm.

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