American Versus Indian Equity Markets

Why assume ours are less advanced than theirs, asks Sudhir Mulji

In last week's column, I wrote that the Securities Exchange Board of India's attack on the badla system was damaging to the most modern aspect of it. Other stock exchanges have discontinued or abandoned Indian type systems under the garb of efficiency and simplicity. I argue that this is not the case and that their reason for doing so may be quite otherwise. Such an argument implicitly suggests that other stock exchange systems are less advanced and that is not a proposition I can expect anyone to readily agree to without expanding my reasoning. To that purpose I devote this week's column, at the same time promising the general reader that these dreary explanations of stock market practices will thereafter cease.

 

The methodology I plan to use is to analytically describe the stock market system in America, supposedly the world's most advanced trading system, and endeavour to explain the outcome.

Broadly speaking, in the United States, the market for equities is governed by two sets of banks