Behave or else: SEBI chief warns stock exchanges on data fudging

K Raghavendra Rao | | Updated on: Dec 06, 2021






High-frequency trades too under lens; Sinha says regulator can change management

SEBI Chairman UK Sinha has put stock exchanges on notice. Reacting to allegations of data fudging and misuse of high frequency trades, he said exchanges must not get the impression that the regulator will always let them off with a warning and not proceed against them.

Speaking to BusinessLine , Sinha said: “Let me assure you that under the SEBI Act and regulations, we have enough power to even change the management (of stock exchanges).

“It is a different matter that we would hate to use it in a routine way, but we have got that power. So, with stock exchanges, clearing corporations — what are called market infrastructure institutions — we monitor their working very closely and we expect them to work in a responsible way.”

Data fudging “If someone is doing it (fudging) deliberately, the answer is that we have the daily data. Earlier, whenever we had a complaint and had to conduct an investigation, we were entirely dependent on the stock exchange for data. It used to lead to a lot of delay. For now, our dependence on the stock exchanges for information has gone down since we have the data with ourselves,” Sinha said.

Investors’ interests On the issue of an institution being perceived as too big to fail, Sinha felt that “If some institution is very critical for the nation, the regulators have to take the perspective of the large base of investors around it. At the same time, it doesn’t mean that the regulators are without any power to act against the offenders and those who conduct the affairs of the exchange. Depending on the case and the frequency of the offence, which is also critical, we can take action.”

Citing the example of the banking system, Sinha said, “In India have you seen any bank being closed by the regulator? In spite of several crises, they arrange a marriage which is either by consent or by force. Why do they do that? Because the regulator is not worried about the management, it is worried about the depositor.”

On more than one occasion, SEBI has appointed an administrator or a committee superseding the board post a violation. In the case of UP Stock exchange in July 2002, Bangalore Stock Exchange (August 2003), Calcutta Stock Exchange (December 2003) and Coimbatore Stock Exchange (April 2006).

SEBI also refused to renew the recognition of the Mangalore Stock Exchange in August 2004 and the Magadh Stock Exchange in September 2007 besides withdrawing recognition to the Saurashtra Kutch Stock Exchange in July 2007 and the Delhi Stock Exchange in November 2014.

(The table accompanying the report "Behave or else: SEBI chief warns stock exchanges on data fudging" (BusinessLine August 19) erroneously mentioned the Bangalore Stock Exchange. The board of Bangalore Stock Exchange (now BgSE Properties and Securities) has never been superseded, as reported. The wrong table has been replaced. The error is regretted. )

Published on August 18, 2015
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