The Hindu Business Line : SEBI plans integrated surveillance system by mid-2005

The system will help curb insider trading and other market manipulations and also make the market regulator's investigations quicker, Mr G.N. Bajpai, Chairman, SEBI, told Business Line.

The integrated surveillance system will be implemented across exchanges and segments. This would include both the cash and derivative markets and even integrate the two.

"Once implemented, this would be a unique, one of its kind system in the world. The US equivalent, at NASD (National Association of Securities Dealers, Inc), for instance, handles only one exchange and that too only for the cash segment," said Mr Bajpai.

The system would cover all exchanges and intermediaries. SEBI would get trading information on T+1 basis. Also, Mapin, the Unique Identification Number exercise of SEBI would be tied in with the new system, said Mr Bajpai.

"For example, if there is any news about a company, the text would be entered into the system. Then based on day-to-day volumes we can find out who is trading on the scrip and if the nature of these are suspicious, we can take up the case and investigate possibilities of insider information," explained Mr Bajpai.

SEBI has put together a committee of technical experts, constituted largely by technology professors from institutes across the country. A study on global practices was also undertaken. The system requirements have been specified and software vendors have submitted expressions of intent.

The technical committee is currently evaluating them and the work order would be given before the end of this calendar year, according to SEBI.

"Implementation would take about 6-8 months and this would be done in phases," said Mr Bajpai.

The system would be in tune with the current global system of risk-based regulation. Inspecting the 9,000 brokers individually would be a near-impossibility. The logical move would be to focus on the big brokers who constitute about 80 per cent of the trading on the exchanges.

Also, even though there are 23 stock exchanges, by sheer volume and size, monitoring BSE and NSE would take care of most of the risks, according to the market regulator.

Currently, the surveillance and inspection team of SEBI has to plough through tons of data before finding patterns of trading behaviour and this has been a serious impediment to quick closures of investigation cases, Mr Bajpai pointed out.

"This would take care of the allegation that SEBI is slow to react and results of investigation take too long to be published," he said.

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