SEBI had set up a committee to look into the short sale practice (bear operators who sell shares without the backup of original securities and cover up when the prices dip) amidst complaints that short sellers are taking investors and the markets for a ride. ``One reason for the fall in market capitalisation since April this year is the sustained hammering by short sellers,'' said an expert who had worked in several stock market panels.The market cap fell by nearly Rs 1,25,000 crore from Rs 5,80,000 crore in April this year to Rs 4,55,000 crore by now. It was short sellers whotriggered the fall. Short sellers were also exploiting the badla system much to the chagrin of bulls. When this tribe depresses the market by selling shares, they get the price difference as well as badla charge from their deals. It's a double advantage for short sellers.

With the Bombay Stock Exchange (BSE) strongly resisting the proposal to regulate short sales, the SEBI committee is yet to finalise a concrete plan of action. The argument of the BSE is that if short sales are regulated, then long purchases (by bull operators) should also be regulated. ``With market manipulation still continuing, there is an urgent need to regulate short sales. Short sellers have artificially pulled down the market on several occasions in the past. One reason for the continuing depression in the stock prices is the existence of unbridled short sales,'' admitted a member of the SEBI panel.Even brokers themselves blame short sellers for the market to remain in the bear orbit for the last three years. ``In the name of naturaladjustment and market balance, short sellers have taken over the markets. Something needs to be done,'' admits one of them, adding, ``it has created turbulence in the market several times. Small investors are yet to understand the complexities involved.''

On the other hand, stock exchanges are yet to come to an agreement over the vexed issue of uniform settlement of share deals. Following severe differences of opinion, the SEBI committee on uniform settlement has failed to reach a consensus over introducing uniform trading rules throughout the country. While one stock exchange follows Monday to Friday trading cycle, another exchange follows the cycle of Wednesday to Tuesday, creating fragmented markets.

Here again, the main attraction of keeping separate trading cycle is to make money in the arbitrage business (buy in one exchange and sell it in another one) as share prices will vary depending on the trading cycle. It is speculators and brokers who go for arbitrage business, not the small investors.Several of these brokers have bought membership cards on several exchanges to facilitate the arbitrage business.