BSE forms panel to fight price-rigging

PUBLISHED : Tuesday, 23 January, 1996, 12:00am
UPDATED : Tuesday, 23 January, 1996, 12:00am

THE Bombay Stock Exchange (BSE) has set up a three-member committee to work out norms to check blatant rigging of share prices.

The committee - comprising BSE president Kamal Kabra, executive director R.C. Mathur and elected director J.C. Parikh - is a response to the trend whereby a stock surges, often on the eve of its public issue, only to crash to below the level it was at before the artificial boom.

The committee intends to use price monitoring methods to help identify instances of rigging.

'We want to examine what kind of surveillance we can routinely put into operation,' Mr Kabra said. 'We would like to determine at what stage the surveillance should come into operation when a stock displays volatility.' Although the BSE's on-line trading system had increased monitoring ability, there were areas beyond the capabilities of a computer.

'For example, if you write a program saying restrictions should be imposed if a share fluctuates more than 10 per cent in 10 minutes, then smart operators will stop at 9.5 per cent, wait for a few minutes, then continue with their rigging,' Mr Kabra said.

The BSE had previously tried to impose price ceilings on certain stocks, he said, while others had been forced to trade on a 'spot delivery' basis.

Such actions had come in for continued criticism, forcing the exchange to shift its stance on several occasions.