Sebi's new framework to curb fudging
THE new framework to curb instances of stock market spoofing kicked off on Monday, whereby serial offenders could face trading disablement of fifteen minutes to two hours.
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New Delhi: THE new framework to curb instances of stock market spoofing kicked off on Monday, whereby serial offenders could face trading disablement of fifteen minutes to two hours.
In spoofing, traders place a large number of buy or sell orders, with intent to cancel before those orders can be executed. Market experts say that excessive cancellations of large orders lead to manipulative increases or decrease in prices, which impacts retail investors.
"Sebi and exchanges in a joint meeting have decided that, in order to further strengthen the order level surveillance mechanism, there shall be an additional order based surveillance measure to deter persistent noise creators i.e. excessive order modifications/ cancellations with an intent to avoid execution," BSE and NSE had said in circulars last month.
The new measure will be applicable on the daily trading activity at the client as well as the broker levels. The exchanges have noted three activities - high order to trade ratio, high instances of order modifications and persistent deferred or lower order execution priority due to frequent modifications- that will be monitored to curb such practices.
If the surveillance system detects instances based on these three activities, it will be considered 'one instant count'. Based on count of instances over a period of 20 trading days, exchanges will determine penal actions.
