MUMBAI, AUG 29: Ruled by a powerful coterie of brokers, the Bombay Stock Exchange (BSE) has once again failed in functioning as a self-regulatory organisation (SRO). The fracas involving the selection of shares for the A group clearly shows that vested interests are still playing havoc in the stock markets and taking investors for a royal ride by manipulating the policies and decisions.The manipulation in the selection of questionable scrips for the A group has once again underlined the need for bringing professionalism on the stock exchanges. ``The administrative and operational set-ups of our stock exchanges need to be revamped. We need a different system where professional managers - who are not brokers - will look after the affairs of the exchange. SEBI and the government should initiate a drastic reform process in the management of bourses. they have failed in acting as true SROs,'' said the former chief of a financial institution.The selection of some questionable scrips in the A group by theBSE recently created a big hole in the credibility of the 120-year old exchange. The meeting of the committee which selected the scrips for the carry-forward business in the A group was attended by 8 members of which four were brokers.As a market analyst put it, ``the BSE and most of the leading exchanges like Calcutta, Delhi and Madras are currently run by stock brokers themselves. There is no wonder that decisions and policies are being tailor-made to suit their interests. The investor interest and market safety has gone for a six.''These exchanges are registered as associations with little transparency and professionalism. The only exception among big stock exchanges is the NSE which is registered as company under the Companies Act. The world over, stock exchanges are moving towards more transparency and public participation. Many of them like the NYSE are going public to list their shares on stock exchanges!The price rigging exercise in BPL, Sterlite and Videocon last year has already exposedthe weak administrative mechanism on the BSE. The president and executive director of the exchange were sacked by the market regulator SEBI for various lapses.``These are not isolated instances. SEBI investigations in the past had revealed non-payment of margins and exceeding business limits by even governing board members and officials of the exchange. The members of the board were indulging in circular trading, front running and speculative excesses. It is clear that these exchanges have not learnt a lesson from past mistakes. Now the government should step in and revamp the system for the benefit of investors,'' said a member of an old committee on stock exchange reforms.The governing board of the BSE is currently a powerful body with unlimited powers to make changes in the exchange's operational matters. However, what makes the difference is that out of 18 members of the board, nine are selected from the brokers. These nine members can not only influence the decisions, they've access to classifiedinformation about the market, positions and margins.Experts feel that the SEBI should go beyond the recommendations of the Mayya committee on model rules and bye-laws (set up by the SEBI) to reform the stock exchange administration. This panel had already proposed that the powers of the president of the stock exchanges should be curtailed and he should deal with the affairs of the exchange at the meeting of the governing board only and should not deal with operational matters. It also proposed that the powers of the board should also be restricted.The new government should take up reforms on the stock exchanges on a priority basis so that investors can come back to the markets with confidence.
