Financial Daily from THE HINDU group of publications
Friday, Sep 23, 2005
Financial Daily from THE HINDU group of publications Friday, Sep 23, 2005 |
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Markets
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Stock Markets CSE cautions against artificially created arbitrage Our Bureau
Kolkata , Sept. 22 THE Securities and Exchange Board of India's caveat on spiralling prices of small-time stocks has led the Calcutta Stock Exchange (CSE) to speak out against artificially created arbitrage, a practice that the regional bourse is not unfamiliar with. The CSE, which has simultaneously advised members to exercise due diligence while dealing with such "undeserving" counters, has drawn members' attention to increased activity in the market, as reflected in the volumes and index movements. While such activity can stem from a few underlying factors, "there is a concern that the bullish sentiments in the markets could be/are being utilised by manipulators to rig up the price of undeserving scrips," an exhaustive note recently circulated by the exchange has mentioned. The reference, indicate Lyons Range regulars, is clearly to activities that lead to increase in prices of companies with weak fundamentals and even names that are loss-making or defunct, and those that have defaulted on loans. Some transactions are solely being executed for availing income-tax benefits, the CSE has mentioned, adding that manipulators seem to be in a position to use the smaller bourses (read: regional stock exchanges) to execute trades at prices that are different from those prevailing on the major exchanges. The result: The creation of arbitrage opportunities. The CSE has further advised members to be more vigilant about the activities of their sub-brokers and clients. Dealings of such entities "should be monitored closely," including correlation of clients' trading activity with the information provided by the clients at the time of registration. The latter should cover financial information and details such as large concentration in one or few securities. Additionally, the exchange authorities have urged brokers to be careful in dealing with illiquid, low-priced stocks. Members who need to alert the exchange in case any unusual activity comes to their notice may also advise their sub-brokers and clients to exercise caution, it is mentioned.
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