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Sebi move no great shakes: Brokers

NetScribes/Pallavi Rao

There is much scepticism about Securities and Exchange Board of India's recent attempt at preventing price manipulation in the markets by barring top stock exchange officials from trading through their proprietary firms. The move will be limited in its scope and impact, say market circles.

Sebi recently announced that the president, vice president and treasurer of a stock exchange will not be allowed to indulge in proprietary trading. It has also asked broker-directors of other stock exchanges to disclose details to the ethics committee of the governing board. This step has been taken with a view to bring greater transparency into the markets.

BSE brokers, however, are of the view that directives of this kind will be flouted, no matter how stringent. "All these guidelines are not going to be of any use. People are still going to manipulate and trade through some other name and misuse the information available. There is no way to prevent this," says BSE member Jayesh Gandhi.

Most brokers and brokerage companies argue that there will always be loopholes in such laws. In the case of corporate entities, for example, even if the head becomes an office bearer of the exchange, there is nothing to stop his brokerage firm from continuing to trade. And a sole proprietor can get around the law by trading under another name, sources point out.

"This (the new guidelines) is a good thing -- Sebi should have done it long back. International exchanges also follow these rules. People who get to these positions should do it like a social service and voluntarily not use their card. But no one can stop the misuse of information," said Bharat Bagri, a BSE broker-member and proprietor of his firm.

There are around 580 active trading members on the Bombay Stock Exchange. Of these, at least 185 are sole proprietary firms, while the rest are corporate members.

Each election at the BSE sees at least four-five candidates (either from the corporates/sole proprietary firms) stand for election. While some heads of corporate entities -- like Anand Rathi Securities, Motilal Oswal Securities, Kamal Kabra Securities, Jaswantlal Chhotalal Securities, Jamnadas Morarjee Securities and Kaji & Maulik Securities - have got elected to the governing board of the exchange, and very few proprietors have managed to join the board since brokers have accepted corporatisation.

"The Sebi decision may be meant well but implementation remains a key issue. Monitoring and surveillance will become a major problem for the exchange," said Pashupati Advani, director, Advani Share and Stock Brokers.

"Even if the office bearers are allowed to trade through their personal account, they should be asked to duly submit a receipt to Sebi and take delivery," said Adi Lim Bilimoria.

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