SEBI cautions bourses on share manipulation

MUMBAI, AUG 25: With the stock exchanges showing huge volatility, the Securities and Exchange Board of India SEBI has asked the stock e...

MUMBAI, AUG 25: With the stock exchanges showing huge volatility, the Securities and Exchange Board of India SEBI has asked the stock exchanges to ensure the integrity of the stock markets and step up the monitoring and surveillance activities.

At a meeting of the inter-exchange market surveillance group today, the market regulator asked the exchanges to identify manipulative trend in the scrips and take pro-active surveillance actions. The meeting, which was attended by representatives of the leading stock exchanges, reviewed the volatile market situation.

Stock exchange authorities have assured SEBI that they are enforcing the risk containment measures by way of margins and exposure limits. The exchanges have a margin cover of more than Rs 2,600 crore as on August 24, 1999. 8220;The big jump in Sensex one week before the polls is surprising. Moreover, FIIs are not investing8230; they are pulling out funds. There seems to be huge manipulation in the market,8221; said an official of an exchange who participated in the meeting.

The exchanges have also informed that they have introduced some additional checks. For instance, in addition to the ceiling of Rs 20 crore in carry forward, BSE has introduced scrip-wise sub-limit of Rs 5 crore for carry forward position by any member in a scrip. Similarly, in addition to the incremental margin which is attracted beyond 3 per cent of the trading of the equity of the scrip in carry forward, the BSE is charging additional carry forward margin of 10 per cent even if it is less than 3 per cent, if the position is greater than Rs 100 crore.

Both NSE and BSE and some other exchanges claimed that they are also keeping a check on the position of the members for containment of risk and if need arise they ask the members to reduce their position and also make early pay-in.

The meeting also discussed the issue of rumours in the market and the exchanges have been advised that they should immediately check these rumours and disseminate to the investors the correct information/ clarification given by the companies.

8220;Though the risk cover available with the leading exchanges, in terms of margins collected on Monday alone stands at over Rs 2,800 crore, we felt proactive risk containment measures must be taken at the exchange level,8221; said SEBI executive director L K Singhvi. The exchanges were also told to make full use of the surveillance capability and stock watch system and ensure that there is no scope for manipulation.

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Some other issues regarding the need for internal documentation for surveillance activity, proper training and certification for the surveillance staff of the exchanges and the reporting requirement to SEBI on qualitative and exceptional basis were also discussed. These issues will be followed up further by the exchanges.

The working group constituted by SEBI comprising of NSE, BSE, DSE, CSE and LSE for evolving a code of ethics for the elected directors and key functionaries also met today. It was decided that exchanges would come out with their own draft codes broadly covering the segregation of powers between the board and executive director, avoid conflict of interest, proper disclosure of situations where directors and key functionaries have interest, abstaining from using information, which is unpublished and price sensitive in nature and acting in the best interest of investors and the market. The exchanges would submit their draft in one month to the working group which would deliberate and evolve acceptable code of ethics.