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The purpose of this paper is to ascertain the possible consequences of ban on futures trading of agriculture commodities in India by examining three critical issues: first, the author explores whether price discovery dominance changes between futures and spot in the pre-ban and post-relaunch phase both in the long run and short run. Second, the author examines the impact of ban and relaunch of futures trading on its underlying spot volatility for five sample cases of agriculture commodities (Wheat, Sugar, Soya Refined Oil, Rubber and Chana) using both parametric and non-parametric tests. Third, the author revisits the destabilization hypothesis in the light of ban on futures trading by examining the impact of unexpected component of liquidity of futures on spot volatility.

The author uses widely adopted methodology of co-integration to examine long-run relationship between spot and futures, while the short-run relationship is investigated using vector error correction model (VECM) and Granger causality to test price discovery in the pre-ban and post-relaunch phases. The second objective is explored using a combination of parametric and non-parametric tests such as Welch one-way ANOVA and Kruskal–Wallis test, respectively, to gauge the impact of ban on futures trading on spot volatility along with post hoc tests to investigate pairwise comparison of spot volatility among three phases (pre-ban, ban and post-relaunch) using Dunn Test. In addition, extensive robustness test is undertaken by adopting augmented E-GARCH model to ascertain the impact of ban and relaunch of futures trading on spot volatility. The third objective is investigated using Granger causality test between spot volatility and unexpected component of liquidity of futures estimated using Hodrick and Prescott (HP) filter to re-visit the destabilization hypothesis.

The author found extensive evidence for the dominance of futures market in the price discovery of agriculture commodities both in the pre-ban and post-relaunch phases in India. The ban on futures trading is found to have a destabilizing impact on spot volatility as evident from the findings of Wheat, Sugar and Rubber. In addition, it is observed that spot volatility was highest during the ban phase as compared to the pre-ban and post-relaunch phases for all four commodities barring Chana. The author found that destabilisation hypothesis holds true during the pre ban phase, while weakening of destabilization hypothesis is observed in the post-relaunch phase as unexpected futures liquidity has no role in driving the spot volatility.

This study is a novel attempt to empirically examine the potential impact of ban and relaunch of futures trading of agriculture commodities on two key market quality dimensions – price discovery and spot volatility. In addition, destabilization hypothesis is revisited to investigate the impact of futures trading on spot volatility during the pre-ban and post-relaunch period.

The purpose of this paper is to examine the effect of short-sale restrictions (SSR) with particular emphasis on their impact on the liquidity and informed trading in the stock and option markets.

Using a panel regression with controls for volatility, VIX and matched stocks, this study examines the effect of the short-sale ban (SSB) on stock and option liquidity, expressed in terms of spread and volume. In addition, the PIN and option information share (OIS) measures have been used to analyze its impact on informed trading in those related markets.

The results suggest that the SSB leads to a significant reduction in the liquidity of the affected stocks and their options. However, no significant change in the trader composition can be detected. This result is consistent to the short-prohibition effect predicted by Diamond and Verrecchia (1987).

Due to the sizeable data required to estimate the PIN and OIS measures, only a select sample of optionable stocks has been examined.

This study offers both academics and policy makers some useful insights into the effect of SSR on trading activities in both stock and option markets. From a policy perspective, it clearly demonstrates that regulatory changes targeting a specific market also affect other related markets via the arbitrage link between them.

Guar Gum (GG) is used in Shale oil exploration. Excessive price increase in the Guar futures market had a spillover impact on Guar spot prices and affected Guar export from India as Shale oil producers started exploring alternate sources. In this paper, the role of excessive speculation in the futures market, and its adverse impact on the guar-based agri-business ecosystem have been empirically explored.

Volatility spillover dynamics between WTI crude oil and Guar futures have been explored using bivariate-Granger Causality, BEKK–GARCH models with Wavelet multi-resolution analysis. The wavelet-based models capture the multi-scale features of mean and volatility spillover to identify the effect of heterogenous investment behavior in the time and frequency domain.

The results provide evidence that excessive speculation in futures markets increases spot market volatility. The results also suggest that the excess presence of short-term investors can destabilize the futures market.

The purpose of the commodity futures market is to support price discovery and risk management. However, speculative practices can destabilize these purposes leading to the failure of the business ecosystem.

The novelty of this paper is twofold. First, it explores the economic linkages between the spot and futures market and tests whether the presence of heterogeneous traders affects the economic linkages. Second, it models the impact of short-term speculative investment on the destabilization of the spot market.

This paper aims to investigate the impact of banning cryptocurrencies on stock markets.

The paper uses an event study approach and data from stock market indices in nine countries that imposed a ban. It uses the constant mean model and the market model, with two different benchmarks for global returns, to analyze if any of the stock indices show abnormal returns on or around the announcement of a cryptocurrency ban.

The analysis shows that banning cryptocurrencies did not affect the returns of stock markets in any of the countries studied, indicating that the cryptocurrency market and stock markets are decoupled from each other, or the ban was not effectively implemented.

To the best of the author’s knowledge, this paper is the first to explore the potential spillover effect of a cryptocurrency ban on stock markets. It also bridges two strands of literature: the relationship between cryptocurrencies and traditional assets, and the impact of cryptocurrency regulation on their returns.

This paper aims to explore trade policy measures taken in response to COVID-19 and analyses in detail their extent and nature. It assesses their compatibility with World Trade Organisation (WTO) agreements: specifically, whether they were necessary and justifiable efforts to protect the security and health of populations and asks how this widespread recourse to trade barriers may impact on international business?

This paper analyses an extensive database from the International Trade Centre of trade measures taken in response to COVID-19. It differentiates by type of country, nature and coverage of measures (imports or exports, type of product…). On the basis of existing jurisprudence, this paper analyses whether restrictive measures were likely to be judged legal under WTO rules.

This paper finds that, although the majority of trade measures are probably justifiable, there were nevertheless many measures whose coverage and/or nature was such that a justification under existing WTO exceptions is, at the very least, arguable. Such widespread and intense instigation of potentially WTO incompatible measures in such a short period of time undoubtedly undermines the global trade rules on which international business has relied for decades.

There is little existing analysis of the legality of measures taken under the security exceptions and no substantial analyses of the measures taken in response to COVID-19. Furthermore, little scholarly attention has been paid to the impacts on international business of the increasing use of WTO “exceptions” to justify trade measures to protect national industries and populations.

Some 40 years have now passed since the US Securities and Exchange Commission (SEC) began seriously to attack the problem of insider trading in its seminal Cady, Roberts decision. Since then, a complex pattern of regulation has evolved, largely through a common law process of judicial interpretation of the open‐ended anti‐fraud provision of the federal securities laws, Rule 10b‐5. While many interpretative questions still remain open, US law in this area broadly prohibits trading based on material non‐public information when:

Regulation of digital currency is still at its infancy as authorities around the world grapple with its mechanics, and study its impact and the best method to regulate it. Significant increase in the use of digital cryptocurrency based on Blockchain technology post-Bitcoin phenomenon had challenged the conventional idea of central bank monopoly in currency issuance. This had also raised concern that digital currency being used as an instrumentality of crime given its anonymity feature that allows for the flow of funds without tracing and the fact that it is built on trustless system that provides security of transaction. This concern, plus other consideration including the prospect of issuing central bank digital currency, had driven some authorities around the world to adopt countermeasures either via an outright ban or a regulatory regime that suits the nature of digital currency, which is purely virtual and anonymous. However, in coming out with an appropriate legal regime, authorities faced multiple difficulties especially when the pace of legal development does not sync congruently with the rapid progress of technology. In addition, given the growing prominence of Islamic finance around the world, questions also arise pertaining to the legality of digital cryptocurrency from the Islamic perspective. Through a qualitative study of relevant literatures as well as legislations in different countries, this chapter discusses the various categories of digital currency, its position from the Islamic perspective, regulatory regimes of digital cryptocurrency in selected jurisdictions and challenges faced by authorities around the world in regulating this new medium of exchange.

After reading the case, the students shall be able to explain the concept of insider trading and differentiate between illegal insider trading and legal insider trading, business ethics, financial institutions, financial markets and accounting; to interpret the legal framework for prevention of insider trading; to identify the role and significance of the market regulator, Securities and Exchange Board of India (SEBI), in detecting financial crimes such as insider trading; to demonstrate the association between information, stock trading and stock prices within the framework of efficient markets; and to appraise the ethical dilemma in a family-owned firm, where the family members of the promoter group are alleged to have indulged in a financial crime.

The case revolves around allegations of insider trading against the promoter and the promoter group of the family owned and controlled firm, Lux Industries Limited. On January 24, 2022, the SEBI, the regulator of securities markets in India, accused Udit Todi, the Executive Director of Lux Industries Limited, of engaging in insider trading through a chain of 14 connected parties. Udit Todi was also the son of the Managing Director, Pradip Kumar Todi, and the nephew of the Executive Chairman, Ashok Kumar Todi. In its interim order, SEBI alleged a breach of insider trading regulations by a group of 14 connected entities that had built up long positions starting from May 21, 2021, before the quarterly financial results (Q4) and the annual results of the financial year (FY) 2021 in the equity shares of Lux Industries Limited, with its registered office in Kolkata, India, were announced. Subsequently, they squared off the long positions to make a profit of ₹29.43m. To restore the confidence of the investors, the Executive Chairman, Ashok Kumar Todi, needed to review the matter expeditiously and impartially. Taking into consideration the family ties of the accused, it was not going to be an easy task, yet, it had to be done. The case highlights the role of the regulator, SEBI, in unearthing financial frauds such as insider trading in an emerging market such as India.

Postgraduate programs in management, Executive education programs.

Teaching notes are available for educators only.

CSS 1: Accounting and Finance