The All India Jewellers & Goldsmith Federation (AIJGF) has formally raised serious allegations of insider trading in silver derivatives contracts on the Multi Commodity Exchange (MCX). In a letter addressed to the finance minister, the federation claims that suspicious trading activities coincided with market rumors about a potential hike in import duties on silver.
Allegations of Market Manipulation
According to the AIJGF, silver contracts on MCX traded at a significant premium of approximately Rs 40,000 per kilogram compared to the prevailing benchmark or spot-linked parity. This sharp and sudden dislocation in pricing has been widely attributed within market circles to speculative rumors regarding an impending increase in import duties on the white metal.
Federation's Formal Complaint
The letter, dated January 21 and signed by Pankaj Arora, national president, and Nitin Kedia, national general secretary of AIJGF, explicitly alleges that certain traders may have had prior knowledge of the import duty discussions. The federation contends that this privileged information was exploited for unfair gains in the derivatives market, creating an uneven playing field for legitimate participants.
MCX's Response and Defense
In response to these allegations, MCX has firmly stated that it maintains a robust surveillance mechanism and operates strictly in accordance with regulatory norms. An MCX spokesperson explained that silver markets are currently experiencing heightened volatility due to evolving geopolitical developments, which, combined with local fundamentals, have naturally impacted domestic market pricing.
The exchange emphasized that prices discovered on their platform serve as an effective hedge against currency movements, duties, and local market dynamics. MCX maintains that their systems are designed to detect and prevent any irregular trading activities, and they continue to monitor market conditions closely.
Market Performance on Thursday
In an unrelated but notable development, silver and gold exchange-traded funds (ETFs) experienced significant declines during early trading sessions on Thursday. These financial instruments fell by approximately 20% initially but managed to recover somewhat, closing about 11% lower by the end of the trading day.
On the MCX specifically, silver contracts for March delivery concluded 2.7% lower in late trades, while gold contracts for February delivery registered a more modest decline of 0.8%. These movements reflect the ongoing volatility in precious metals markets amid broader economic uncertainties and policy speculation.
Broader Implications for the Jewelry Industry
The allegations come at a sensitive time for India's jewelry sector, which relies heavily on stable precious metal pricing for business planning and inventory management. Any perception of market manipulation could undermine confidence in commodity exchanges and potentially affect thousands of jewelers and goldsmiths across the country.
The AIJGF's decision to escalate the matter directly to the finance minister underscores the seriousness with which the industry views these allegations. The federation represents a significant portion of India's jewelry trade and their concerns carry substantial weight in policy discussions affecting the sector.
As regulatory authorities likely examine these claims, market participants will be watching closely for any official investigations or policy responses that might emerge from these allegations of potential insider trading in silver derivatives.
