Market regulator Securities and Exchange Board of India (SEBI), on Friday, said it would soon announce measures to protect investors against stock crashes on the bourses.
Last month, the National Stock Exchange (NSE) witnessed ‘flash crash’, when the Mumbai-based brokerage Emkay Global Financial Services sent the exchange index tumbling as much as 15.5 per cent in just a few seconds, creating a panic among traders. The crash was the result of erroneous trades worth $126 million, placed by Emkay Global.
“We are going to take some measures so that there is some pre-check in orders, in pricing and there are some other checks also introduced. We are looking at avoiding similar incidents,” SEBI Chairman U. K. Sinha told reporters here on the sidelines of a securities market conference.
“We are going to announce some measures based on experts views. Lapses on part of any intermediaries will be looked at separately and actions will be taken,” Mr. Sinha said.
He said the regulator was acting on both the fronts — systematic improvement and action for lapses.
Commenting on the regulator’s decision to discontinue mini-derivatives contracts, Mr. Sinha said as a measure of experiment, SEBI allowed mini-derivatives contracts, but data show that trading in mini contacts constituted only a minuscule and it was felt that there might be certain amount of misuse and mis-selling happening in those contracts.
“Therefore, as a measure to provide safety to small investors we have taken the decision to discontinue mini contracts,” he said.
Derivatives contracts first started with a minimum ticket size of Rs.2 lakh. But earlier this week, the regulator banned it.
Replying to a query on call-data records, Mr. Sinha said, at his meeting with the government officials, they assured him that they were going to find a way on how to provide that data.
“The difficulty on the part of the government is that there is a judicial pronouncement about how conversation can be shared or intercepted. I was given to understand that keeping that sensitivity in mind — that privacy of all are respected — at the same time providing some rule whereby regulators like SEBI can get access to call data records.
“They are thinking of amending the rules. I am not talking of law, but the rules. I believe the rule making process is on and hopefully it will be ready soon,” Mr. Sinha said.
On rationalisation rules for portfolio investments, Mr. Sinha said the government had accepted only qualified foreign investors (QFIs) portion of the report by the working group.
At present, foreign portfolio investors take various routes such as foreign institutional investors (FIIs), QFIs or private equity (PE).
“Our interaction with the Finance Ministry indicated that they would like us to start working in that direction. They wanted us to work in that direction, so we are in process of setting up working group on small committee which will have representations from tax people, legal and market participants,” he said.
On the Sahara imbroglio, he refused to comment saying that “there are certain directions from the apex court, and we are working on to implement them.