With characteristic deviousness, the authorities have allowed, and probably even encouraged the squabbles between the two exchanges. NSE promises to bring in an ultra modern futures and options system as if that is going to turn Dalal Street into Wall Street. BSE wants to return to the old familiar system. Naturally this aspiration is highly suspect. Who would want an old car when a new one will give speculators everything they want? It proves to the LC Guptas of this world that there was something very fishy about the old badla system. It allowed manipulation, as Harshad Mehta showed, thereby robbing lakhs of poor investors no doubt all from Bihar and eastern UP.
In this analysis, the details have been conveniently ignored. In fact, it was the closed securities market and not the stock market that Harshad Mehta manipulated. He produced liquidity by knowing the inner workings of the SGL system, and the interplay between bankers receipts and the loose payment system that prevailed between the banks. But he knew that he could never afford to fail on settlements to the stock exchange. He duped many intelligent people because they were mesmerised by his capacity to generate liquidity. No one realised that he was following the oldest of all financial tricks - robbing Peter to pay Paul.
When the mouse is born, we must expect some drama. The new system will run on twin tracks, like an expensive car with two cam-shafts, having a special audit trail that will tell us precisely what is happening so long, that is, that anyone bothers to read and understand it. The media will be celebrating the birth of this report with profound awe and all the ritual of Gokul Ashtami. Much creativity will be expended to write about something that says nothing. The most depressing part of Sebi is that time has taught them nothing. They remind one of the tale, relating to a minor school that invited its more distinguished neighbour to a cricket match. The reply came: Of Eton we have heard and of Harrow, but who are ye? The witty answer was: We are the sons of Balaam looking for our fathers asses and lo! we have found them. Members of Sebi simply refuse to apply their minds to the problem. If they did they might conclude that the old badla system was in many respects a perfectly acceptable system. But where ignorance is bliss it is indeed folly to be wise.
