The Hindu Business Line : SEBI panel suggests disclosing names of top 10 trading members

THE names of top 10 brokers and trading members in terms of trading volumes in each security in the cash and derivative market can now be disclosed by the exchanges.

According to the recommendations of SEBI's advisory committee on derivatives and market risk management, this information may be disseminated with a time lag of seven days on a daily basis.

The members of the committee who favoured this disclosure believed that it would allow the market to detect attempts by a group of traders to ramp up a stock or to create a false liquidity in the stock.

The committee further debated the disclosure of names of top 10 trading members in terms of open interest and proprietary trading open interest in each security in the derivatives market.

The top 10 would be computed for each underlying and not for each contract, in order to reduce the information that needs to be disclosed.

The information disclosed under this provision could help the market detect any attempt at a squeeze or corner. When combined with the data about the cash market, it would allow market players to fathom manipulative strategies that straddle the two markets, said the report.

Currently, information about FIIs is disclosed on an aggregate basis. The committee suggests that FIIs and their sub-accounts may be categorised as pension funds, insurance companies, mutual funds, other broad-based funds, proprietary funds and others based on the information submitted by the FIIs during their registration with SEBI. This exercise is meaningful only if it is carried out at the sub-account level as an FII might be an investor of one type, but its sub-accounts might be of different types.

The aggregate trading of each category of investors in both the cash market and derivative markets may then be disclosed to the market. This would allow the market to distinguish between different types of FII flows on the basis of their likely time horizons of their trades, suggested the report.

The committee also reviewed the possibility of disclosing the alerts generated by stock watch in exchanges. Exchanges use stock watch software to generate alerts about suspicious price movements or trading patterns in the market.

The committee was partially of the view that stock watch alerts are a powerful way of processing confidential order book and transaction data in real time and summarising them in a way that does not disclose any confidential trader level data.

While most members of the Advisory Committee supported the proposals for disclosures related to FII activity and stock watch alerts, there were serious disagreements about the proposals for disclosure of member level activity and position data, said the report. Since there was a difference of opinion in the committee on some of these proposals, the report has been put up for public comments. Based on the feedback, these would be further discussed, said the report.

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