1. The National Spot Exchange Ltd. crisis has been in news recently. Discuss the crisis, its causes and suggest a way forward.

Approach:

♤ This question involves some intricate concepts of economics, which may require some extra effort to understand.

♤ Key points that require understanding:

o The original intended role of NSEL i.e. spot market for commodities

o NSEL’s involvement in forward trading, which was beyond its original mandate.

o Recent decision of the govt. to stop launching the new forward contracts triggered the crisis.

o Failure of the regulator to keep a watch over the exchange activities; so regulatory system should be strengthened.

♤ If you are able to comprehend the key points, then it should be sufficient to write this answer without going into too much details.

♤ But in case, you are not able to comprehend the key points – its still ok. Just refer the basic concepts of economics related to spot markets and forward trading.