pump and dump
Recently, fraud committed by foreign companies like Jane Street was in the news in the stock market. How companies had defrauded investors hugely through call-puts. There was a lot of noise about it on social media also. Now SEBI is preparing to crack down more strictly on the companies and people involved in fraud through these call-puts. The market regulator is working on advanced analytics tools, which will help in detecting fraud more quickly.
SEBI Chairman Tuhin Kanta Pandey recently told in an event of BSE Brokers Forum (BBF) that now he is working towards making the market monitoring smarter. Where earlier there was reactive supervision, now they are moving towards predictive oversight. For this, SEBI has updated its data warehouse system. This will make it easier to detect frauds like pump-and-dump. With the help of new rule-based alerts, irregularities in big deals can also be detected.
Techniques for spotting pump-and-dump schemes
Tuhin Kanta Pandey said that pump-and-dump schemes follow a specific pattern, which can be detected through data analysis. These patterns have been seen in many orders of SEBI. With the new technology, it will now be easier to detect such cases in advance, due to which SEBI will be able to take action faster. SEBI is also planning to bring a safety net system for depository participants (DPs). Pandey said that if any DP faces technical problem or outage, it can be handled at the depository level. This will be similar to the security system for stock brokers. Also, regarding weekly expiry in futures and options, SEBI Chief said that SEBI has implemented many rules based on data analysis. In future too, they will take steps thoughtfully and with consultation so that the market improves and investors are protected.
Emphasis on cash market and SLBM
SEBI Chief said that in the last three years the daily trading volume of cash equity market has doubled to more than Rs 1 lakh crore. This is a strong basis for capital formation. This market needs to be further strengthened. Also, the security lending and borrowing mechanism will have to be reviewed according to risk management.
Strictness on cyber fraud
SEBI is also working on making the rules easier and less expensive for stock brokers. Pandey said that many suggestions have been received and by September this proposal will be taken to the board for approval. SEBI Chairman also said that protecting investors from cyber frauds and unregistered financiers is his top priority. For this, SEBI is working closely with market institutions and intermediaries.