Expunge the exchanges of politics

A whistleblower letter quoting a big sum and some big names is floating around

For decades, the stock exchange was largely an entity of the brokers, by the brokers, and for the brokers. Whoever got in entered at his own peril and would consider himself lucky if he came off with his shirts still on his shoulders.

All this changed after the Harshad Mehta scam of the early 1990s. The country realised the need for market regulation and recognised the necessity of market infrastructure institutions such as exchanges to be managed professionally. Technology enabled the elimination of conflict of interest between the trader and the platform.

A handful of professionals formed the nucleus of this transformation. They worked together in initial years and complemented each other well, benefitting the larger system.

What was then perceived to be a cleaner model emerged. The regulator and the government stepped in to formulate the holding norms and governance structure of these market infrastructure institutions, ensuring that narrow, short-term interests did not pose a threat to the larger ecosystem.

Master Oogway, the wise old turtle of Kung Fu Panda, says: “One often meets destiny on the road one takes to avoid it.” True to those words, the professional nucleus that drove the modernisation of these bodies has today given rise to problems that threaten the very edifice they created.

Spurred by the initial success, the organisation grew bigger, but as the patriarch grew older and the stakes became higher, a succession battle ensued.

Some from the nucleus left for greener pastures, not very far away from their core competencies. Others found opportunities in allied businesses. Over the years, the splinter groups of this nucleus seem to have become so personally bitter about each other that they have tried to destroy each other professionally.

When their own resources have been inadequate, they sought the shelter of politicians in power. Sometimes these were to protect or foster their interests, on other occasions these have been to put the rival in place. There began a slippery road. In the dynamic world of politics, equations can change quickly and being close to one could be seen as being inimical to the other. In any case, the fortunes are aligned to a five-year cycle.

Over the past decade or so, the rivalry within the exchange ecosystem has come out in the public domain. It is often fought on various forums such as the media, regulators, and even the courts. Significant time and energy is spent on pulling each other down. Retired bureaucrats, many of whom have been appointed to the boards of these institutions, also come with their own baggage of political leanings and connections. In the process, often the institution becomes the target and several innocent people are caught in the cross fire.

The latest manifestation of this state of affairs is doing the rounds in the form of a whistleblower letter. It quotes irregularities involving a large sum with certain big names thrown in. Some right-wing websites are already running a series based on this.

Soon the regulators would be called upon to investigate and a predictable routine beckons.

This kind of bickering has affected the growth of the market. It is difficult to pick any new product or facility that has been developed well in the past 10 years. It is time to rethink the governance models of these institutions. The backdoor influence of politicians and bureaucrats needs to reviewed. Perhaps, shorter, fixed tenures for people at the top would help. 

Twenty-five years since the first cleaning up, it is time to clean the exchange ecosystem of all its dirty politics again. October 2 is not a bad day to start the Swachh Exchanges Abhiyan.