Last February, SEBI dug out the charges it made in March 2001 and banned Shankar Sharma from trading for a year. As parse Indian mindset people believe that since SEBI punished Shankar Sharma, he must be guilty. Here lies the need of reality check. SEBI base all actions against Shankar Sharma on section 11.It says that if SEBI thinks it is in interest of investors or the market, it may issue any directions it likes to any company or intermediary.
Shankar Sharma is accused of having carried out synchronized trades. A synchronized trade is a trade where the seller and buyer execute the trade for almost same quantity and price at substantially the same time. Synchronized deal with fraudulent or deceptive intention to create misleading appearance of trading and to manipulate the price and volume of the scrip & to disturb the price discovery mechanism of Stock Exchange is a serious offence. Bull uses his firms to place buy and sell orders successively and pushes up the price of the scrip. Innocent market watcher will see the movement in price and will rush to buy shares. At this point of time, Bull sales and book up his profit while individual investor turns up losing money.
Irony lies in the fact that SEBI is the only regulator in the world which punishes synchronized trades. This raises two possibilities, firstly only Indian’s have discovered this trade mechanism and others have not been able to catch up to it. This is flattering to us but it is not possible, considering the evolution of financial system in India. The second possibility is that regulators all over the world see nothing wrong in Synchronized trading mechanism. Answer lies with us but who will regulate the regulators??
Why regulator does that is the next obvious question. Answer lies in the fact that if police don’t create criminals, then they are out of Business. In this case they are creating CRIME, considering the fact that they will automatically get criminals.
