|HOME | BUSINESS | COMMENTARY | R C MURHTY|
|March 25, 1999||
Business Commentary/ R C Murthy
Time for spring-cleaning stock exchanges
Ten months after investigations, hearings and procedural formalities, the curtain has virtually come down on the row over alleged rigging of BPL, Videocon and Sterlite shares on the Bombay Stock Exchange last May.
The Securities and Exchange Board of India, the capital market regulator, had given its verdict in November last on the role of BSE vice- president, Rajendra Banthia. Now, it is the turn of its president, J C Parekh. The role of BSE executive director, R C Mathur, is still being looked into.
The triumvirate is accused of accommodating some brokers' transactions by restarting computer trading terminals after official working hours.
The BSE was made to accept shares, instead of cash, as margin money. That is said to have saved the cash-strapped brokers. The accusation is, overall the BSE President had not maintained high standards in decision-making and administration.
There were many who were astonished at the way the BSE bigwigs handled the problem. As it became the talking point, the SEBI had no alternative but to institute an inquiry.
T he entire episode smacks of favouritsm and lack of transparency, to say the least.
Well, one can find an alibi, as Parekh tried to, to justify his actions. His point is, had he not acted the way he did, the stock market would have collapsed, bruising investors.
And therein lies the rub. Where are the investors?
Few investors patronise the stock markets. Investment brokers like Hemendra Kothari have no interest in the BSE management. Institutional investors have devised their own methods of trading. Which in simple terms means bypassing the stock exchanges.
The existing scenario presents a grand opportunity for the SEBI to clean up the Augean stables. But then it's a long haul.
Firstly, a thorough overhaul of the stock market -- not just the BSE -- is required. Secondly, investment brokers who have deserted the governing board, should be made to return. That is rather difficult.
Probably, the younger generation of that class of brokers may have an inclination to take the challenge.
The capital market watchdog will have to ensure healthy traditions, back appropriate talent and create an atmosphere conducive to sustain it.
There is a view that the Bombay Stock Exchange is left with speculators and their brokers, who themselves allegedly dabble in trading. If this is true, certainly, they will resist reform.
A reflection of this situation could be seen in a couple of days. The BSE governing board elections are due. It seems the speculator- brokers are apparently determined to block the rise of Dina Mehta to the top slot.
If that lobby succeeds and if a person stronger than J C Parekh emerges, the present state of affairs is expected to degenerate into a confrontation. All eyes are riveted on what happens on March 29 when the BSE elects a new board.
Whether or not Mehta is elected, the issue of acts of impropriety by the BSE members will snowball into a confrontation. It is a matter of time.
Testing times are ahead for the SEBI chief D R Mehta. Has he to supersede the BSE board? If events are just economics-driven, that may happen.
The situation may change if politics influences decision-making at the ministry of finance and the capital market watchdog is advised to go slow.
Unlike the Telecom Regulatory Authority of India, the SEBI appears more pliable. The latter does not seem to be itching for a confrontation. Finance Minister Yashwant Sinha may be thanking his stars.
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