October 4, 2021 4:34:05 am
Amid surge of retail investors into stock markets, and the rise of benchmark indices to record highs over the last one year, the capital markets regulator is closely monitoring stock recommendations aired across business TV channels for “unfair trade practices” by hosts.
Sources in the know of the matter told The Indian Express that the Securities and Exchange Board of India (Sebi) has deployed sophisticated surveillance tools to help it establish any connection between recommendations made by hosts during a show and illicit profiteering on the side if any — including image processing and machine learning models to capture stock recommendations on shows.
Action will be taken in cases where unfair practices are established. A source said that the regulator is closely monitoring all business channels, across languages, that air recommendations to buy/hold/sell stocks with price targets.
“The videos of such shows are captured and converted to a readable format to grab details of recommendations. The recommendations are then checked with the price movement of the particular scrip, and trading activity in the scrip, to detect if anyone has made significant profits,” a source said.
Sebi has been using software and tools to analyse call records data, social media messages which are publicly accessible, as well as bank statements etc, to establish connections amongst suspect entities.
Under current Sebi Chairman Ajay Tyagi and whole-time member Madhabi Puri Buch (who heads both Surveillance and Information Technology Departments of Sebi), the regulator in the past couple of years has strengthened its surveillance capabilities through various technological tools.
The focus has been to augment market surveillance systems in Sebi with advanced analytics (like pattern recognition, text mining, predictive analytics, artificial intelligence and machine learning etc).
The monitoring of stock recommendations aired on TV channels is one more area where Sebi has now deployed new technological tools. In January, the watchdog had passed an interim order against the host of a show on a prominent business channel for indulging in “unfair trade practices”.
According to the confirmatory order passed by the markets regulator last month, buy positions were created in the trading accounts of the wife and mother of the TV show’s host in the respective scrips one day prior to the recommendations given on the show.
These buy positions were exited by selling the said shares on the recommendation day, at a price higher than at which the shares were bought just the day before, thereby generating significant profits.
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