Regulatory authorities used intra-day trading curbs more often last year

Regulatory authorities barred intra-day trading of stocks often to curb speculation in the last financial year.
 

Instances of stocks being transferred to the trade-for-trade segment rose 12-25 per cent across exchanges during the year, reveals data from the Securities and Exchange Board of India’s (Sebi’s) recently released annual report for the financial year 2019-20 (FY20). The trade-for-trade segment doesn’t allow shares to be bought and sold on the same day.
 

The number of times it happened rose from 257 to 289 on the National Stock Exchange (NSE), 435 to 539 on the BSE and from 246 to 292 on the Metropolitan Stock Exchange of India (MSEI).
 

“The stock exchanges initiate surveillance measures, like the periodic price bands, shifting to trade-for-trade (TfT), tightening the price bands, etc., on the basis of the alerts and the analysis of trading in the scrips. The stock exchanges also take punitive actions (suspension of the trading in the scrips, debarment of the suspected entities, etc.),” said the annual report.

Among other surveillance actions, instances of imposition of price bands, which restrict a stock’s movement, in a given period fell on the NSE. Preliminary investigations rose on the NSE but fell on the BSE and MSEI. Rumour verification fell across the three exchanges. It dropped from 222 to 153 on the NSE, 235 to 160 on the BSE and from one to zero on the MSEI.

The number of letters sent to companies based on variations in price and volumes rose from 121 to 216 on the NSE. Sudden changes in price and volumes are sometimes seen in advance of key company announcements. Such activity has often resulted in allegations of people trading with advance knowledge of company developments. Stock exchanges write to companies when such spikes are seen so that all investors have an opportunity to understand what might be driving such movements. Such letters rose from 366 to 164 on the BSE between FY19 and FY20. It was unchanged at zero on MSEI in the same period.

“Complementing the surveillance infrastructure of the stock exchanges, Sebi has robust in-house systems in place to monitor activities across all market segments and exchanges and to check unfair trade practices like market manipulation, front running and insider trading. The Joint Fund-Bank Financial Sector Assessment Programme of India noted that building a robust market surveillance system, among others, allowed Sebi to build a reputation of being a credible enforcement agency,” added the annual report.