SEBI group to review circuit breakers today

By Staff Reporter

HYDERABAD, APRIL 25. The risk management group of the Securities and Exchange Board of India (SEBI) is meeting tomorrow to consider whether to continue with the circuit breakers on the stock exchanges or have the eight per cent circuit breaker with a half an hour limit. It will also decide on the issue of short sales. In view of the highly volatile situation in the exchanges five per cent additional margins were imposed today on scripwise sales positions. This would also be reviewed by the risk management group tomorrow, according to Mr. D. R. Mehta, Chairman of SEBI.

Addressing a press conference here, Mr. Mehta said that despite the current volatility in share prices Indian stock markets were safe. ``Volatility is a universal phenomenon, and India cannot be isolated. Our main concern is the investors' safety and they are safe today," he said.

He pointed out that during the last five years markets were never closed in India due to a crisis. ``That is the strength of Indian markets (even U.S. markets have had closures)''. He said 55 per cent of outstanding positions had been collected in the form of margins (Rs.5,500 crores), and if the Trade Guarantee Fund was taken into account, the cover would be 75 per cent. Measures such as imposition of margins, circuit breakers and exposure limits had been quite effective, he said.

On monitoring of markets, Mr. Mehta said every country kept a watch on its markets. The Hong Kong Government had once spent $9 billions to save its stock market. He agreed that volatility on Nasdaq should not be linked to performance of Indian markets, though its effect was being reflected here.

``Our constant effort has been to make the surveillance system effective and modernise the infrastructure''. Competition has been introduced along with corporate governance. The passage of the Finance Bill and the likely changes in the ESOP and venture capital guidelines, he felt, would contribute to some fundamental changes in the markets.

On the issue of ``vanishing companies'', Mr. Mehta said ``more action is due''. It was an ongoing process and initially a few hundred cases had been identified. A month ago 98 companies were identified as having ``vanished'', and notices were issued to 80 companies. Over 200 directors were debarred from the market for five years. The Department of Company Affairs filed 100 prosecutions, and penal action was being taken by it.

The SEBI had also requested the department to have such companies liquidated. It had also written to the State Governments to take action under the Indian Penal Code against such promoters. While agreeing that vanishing companies had to be punished severely, he pointed out that in the case of 43 companies, SEBI had not received a single complaint.

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Section  : Business
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