NSEL effect: Sebi to revisit policy on proprietary trading by brokers
20 Jan 2014 9:53 PM GMT
To ring-fence small investors from any manipulation by brokers, market regulator Sebi is considering revisiting its policy on proprietary trades.
Such trades are conducted by brokers for their own gains and not for the clients.
Brokers are required to make strict disclosures about their proprietary trades and ensure a 'Chinese Wall' like structure between these trading activities and the trades conducted by them on behalf of their clients. However, many cases have come to fore in the recent past where some brokers were found indulging in manipulative activities involving their proprietary trades, while in certain cases, clients' money has been misused for their own trading interest as well, officials said. Cases like the NSEL crisis have also revealed possible manipulations by brokers and Sebi has therefore decided to revisit its policy on proprietary trades, they added.
In proprietary trading, brokerage firms trade in stocks, bonds, currencies and commodities, among others, with their own fund rather than customers' money, in order to make a profit for itself. Besides safeguarding the overall market-place from any manipulation by brokers, the new policy would also look to further ring-fence clients' money from any utilisation for proprietary trading by brokerage firms, officials said.
Revising the policy for proprietary trades is one of the key focus areas in secondary market for Sebi this year. During the last fiscal, Sebi inspected more than 200 stock brokers and sub-brokers to check any possible non-compliance of norms to check money laundering and terror funding through capital markets.
This marked a significant jump from a total of 81 brokers and sub-brokers on whom such inspections were carried out during the previous fiscal 2011-12.
Such trades are conducted by brokers for their own gains and not for the clients.
Brokers are required to make strict disclosures about their proprietary trades and ensure a 'Chinese Wall' like structure between these trading activities and the trades conducted by them on behalf of their clients. However, many cases have come to fore in the recent past where some brokers were found indulging in manipulative activities involving their proprietary trades, while in certain cases, clients' money has been misused for their own trading interest as well, officials said. Cases like the NSEL crisis have also revealed possible manipulations by brokers and Sebi has therefore decided to revisit its policy on proprietary trades, they added.
In proprietary trading, brokerage firms trade in stocks, bonds, currencies and commodities, among others, with their own fund rather than customers' money, in order to make a profit for itself. Besides safeguarding the overall market-place from any manipulation by brokers, the new policy would also look to further ring-fence clients' money from any utilisation for proprietary trading by brokerage firms, officials said.
Revising the policy for proprietary trades is one of the key focus areas in secondary market for Sebi this year. During the last fiscal, Sebi inspected more than 200 stock brokers and sub-brokers to check any possible non-compliance of norms to check money laundering and terror funding through capital markets.
This marked a significant jump from a total of 81 brokers and sub-brokers on whom such inspections were carried out during the previous fiscal 2011-12.
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