The Integrated Market Surveillance System (IMSS) has helped the regulator detect a “possible order book manipulation scenario that existed in the trading engines of one of the two stock exchanges”. The Securities and Exchange Board of India (Sebi) informed its board of directors at a recent meeting that this problem is now being plugged, but omits to say whether the systemic hole has ever been exploited by market operators. Instead, its bland surveillance report claimed that IMSS alerts have been helping it detect abnormal trading activity and market behaviour and that 120 letters have been dashed off to market intermediaries, either cautioning them or seeking an explanation. It is not clear whether the Sebi board questioned this information, especially when recent data shows that India is the third most volatile market in the world. The board was also provided details of the embarrassing first day flare up (after a new listing or corporate restructuring/ merger/ demerger) in share prices of companies such as Ahluwalia Contracts (India) and AI Champdany, but not MindTree, which had such a dizzy post-listing run-up that even its management was surprised. Here too, there is no information about large traders who may have ramped up the shares like in the Nissan Copper case. Sebi has merely asked the two national bourses not to relax first day circuit filters until they evolve a common policy for implementing price bands. Ironically, these cases of market manipulation have been glaringly evident to ordinary traders even without the benefit of an expensive and sophisticated surveillance system. The regulator is surely expected to be able to provide a lot more than mere price trends to its board.

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