The Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) have published the rules for putting scrips under surveillance.
This follows cases of sharp prices movements prior to a stock’s inclusion or exclusion in the trade-to-trade (T-T) group.
Under the T-T category, punting is discouraged as stocks attract a circuit filter of five per cent and delivery is compulsory. This makes rigging difficult. Also, buy and sell orders are monitored. Often, scrips are put in this group when unusual price movement is witnessed.
| KEY FACTORS |
| The broad criteria for shifting a scrip to the Trade-to-Trade category include:
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Although the T-T category was introduced shortly after the 2001 Ketan Parekh scam, the detailed guidelines of how, when and why a scrip would be put under surveillance were not disclosed to the markets. The decision was taken mostly in consultation with the Securities and Exchange Board of India (Sebi).
Stock brokers said absence of published rules left the field open for corruption. Also, in a majority of cases, though scrips were put under surveillance, there was no specific disclosure by the exchanges about any rigging or price manipulation. Such details, said market players, would make the exchange and Sebi officials accountable.
Brokers said once a particular stock was in the T-T group, some operators managed to influence exchange officials to bring it out of the category. “Rules regarding inclusion and exclusion of stocks in the T-T group are vague. Nobody questioned why a particular stock was put under surveillance in the first place,” said a broker.
Some officials close to the development also leaked information about when a stock would move in or out of the T-T group.
The information was vital for traders as it gave them time to either square off or create new positions. BSE has 573 stocks under surveillance while NSE has 96.
The recent sharp rise and fall in the price of Ramswarup Industries is a classic example of price manipulation through leakage of information. From a high of Rs119 on July 23, the stock fell 30 per cent to Rs82.9 on August 17 when it was included in the T-T category. It was trading at Rs37.9 on BSE and NSE today.
Market sources said a Gujarat-based operator, who has been active on the counter, was liquidating his position as it was likely that he had prior information about the scrip being put under surveillance. Last week, the issue was discussed among officials of Sebi and both NSE and BSE. Sources present at the meeting told Business Standard that Sebi Chairman C B Bhave left the decision on disclosing the guidelines to the exchanges. Still, the exchanges have not disclosed as to how long the stock will remain in the T-T category.
