e    rit  ar et in ndia      14.9
           The facilities provided by the spot exchange,             different price perceptions, as the buyer
     like a normal stock exchange, include clearing                  or seller merely expresses their desire to
     and settlement of trades. Trades are settled on                 trade without even meeting directly.
     guaranteed basis (i.e., in case of default by any         (iii) Ensures participation in large numbers
     person exchange arranges for the payment of                     by farmers, traders and processors across
     money/good) and the exchange collects various                   the country and eliminate the possibility
     margin payments, to ensure this. The exchange                   of cartelisation and other such unhealthy
     also offers various other services, such as, quality            practices prevalent in the commodity
     certification, warehousing, warehouse receipt                   markets.
     financing, etc.                                           (iv)  It brings in some best practices in
                                                                     commodity trading like, system of
     sPot exchAnges in inDiA                                         grading for quality, creating network
      At present, there are four spot exchanges operating            of warehouses with assaying facilities,
     in the country:                                                 facilitating trading in relatively smaller
           (i) The National Spot Exchange Ltd.                       quantities, lower transaction cost, etc.
               (NSEL), set up in 2008, is a national level      (v)  Bank finance available against the
               commodity spot exchange promoted                      goods in the warehouse on easier terms
               by the Financial Technologies India                   improves holding capacity and can
               Ltd (FTIL) and National Agricultural                  actually incentivise farm production and
               Cooperative Marketing Federation of                   hence reduce rural poverty.
               India Limited (NAFED). After the FTIL           (vi)  Since the trades are guaranteed (by the
               was found involved in irregularities, the             exchange), counter party risk is avoided.
               FMC (Forward Market Commission), by
               end-March 2014 asked it to exit the spot    rAising cAPitAl in the PrimAry mArket
               exchange.
                                                           There are three ways in which a company raises
          (ii) NCDEX Spot Exchange Ltd (established        capital in the primary market.
               in October 2006 by NSE).
        (iii) Reliance Spot Exchange Ltd. (R-Next).        Public Issue
         (iv) Indian Bullion Spot Exchange Ltd. (an        A public offer is open for all Indian citizens, the
               online over the counter spot exchange).     most broad-based method of raising capital and
                                                           the most prestigious, too (the Reliance Industries
     ADvAntAges of sPot exchAnges                          Ltd. is the biggest company of India in this
     Spot exchange provides various advantages over        category).
     the traditional way of trading in commodities:
                                                           Rights Issue
           (i) Efficient price determination as price is
               determined by a wider cross-section of      Raising capital from the existing shareholders of a
               people from across the country, unlike the  company, it means it is a preferential kind of issue
               traditional ‘mandis’ where price discovery  restricted to a certain category of the public only.
               for commodities used to happen only
               through local participation.                Private Placement
          (ii) Ensures transparency in price discovery—    Raising capital by selling shares to a select group
               anonymity ensures convergence of            of investors, usually financial institutions (FIs) but