The role of the regulator

With reference to Jaimini Bhagwati’s article “Integrity and Indian Capital Markets” (April 20), Sebi’s role in tightening the screws on insider trading associated with capital market operations has received criticism. The arguments questioning the integrity of the regulator can generate considerable amount of attention and debate.

First, the Sebi, since inception, has enjoyed autonomy with little interference of Ministry of Finance to oversee and monitor the development of the capital markets. It is a professional-run entity with adequate expertise in product development, surveillance and risk management. This is evident from past committee reports and recommendations on capital market development and Sebi’s adoption capacity to maintain capital market transparency.

Second, Sebi’s bandwidth in monitoring both capital and commodity derivative markets deserves a mention. The regulatory convergence flagged off in 2015 had allowed the Forward Markets Commission, the then regulator of commodity derivative market, merge with the capital market regulator. This one-off event is expected to enhance and broad-base participation and bring more liquidity in the market with a unified broker code of market operation.

Third, rogue traders are omnipresent in every market and that cannot vitiate the sanctity of the regulator. While the prevention of fraudulent practices has already been put in place in India similar to the United States or the United Kingdom, demutualised exchanges should be responsible for maintaining an arm’s length relationship with brokers or members and prevent any untoward event such as market cornering or insider trading or can take corrective measures as and when necessary. Kushankur Dey Bhubaneswar