In Indian share market Harshad Mehta and Ketan Parekh Scams have forced Stock Exchanges to be very stringent about their rules and regulations. To protect the interest of Investor, maximum use of technology and minimum interference of human was needed. Through their NEAT and BOLT screen-based trading system NSE and BSE
- NSCCL has put in place an on-line monitoring and surveillance system whereby exposure of the members is monitored on a real-time basis.
- A system of alerts has been built in so that both member and NSCCL are alerted as per pre-set levels (reaching 70%, 85%, 90%,95%, and 100%) when the members approach their allowable limits.
- The system enables NSCCL to further check the micro-details of member’s positions, if required and take proactive active action.
on-linesurveillance mechanism also generates various alerts/reports on any price/volume movement of securities not in line with past trend/patterns. For this purposethe exchange maintains various databases to generate alerts.
- Alerts are scrutinized and if necessary taken up for follow up action. Open positions of securities are also analyzed.
- Besides this, rumors in the print media are tracked and where they are price sensitive, companies are contacted for verification. Replies received are informed to the members and the public.
- Off-line surveillance activity consists of inspections and investigations. As per regulatory requirement, a minimum of 20% of the active trading members are to be inspected every year to verify the level of compliance with various rules, bylaws
andregulations of the Exchange.
inspectionof more members than the regulatory requirement is undertaken every year. The inspection verifies if investor interests are being compromised in conductof business by the members.
- The investigation is based on various alerts, which require further analysis. If further analysis reveals any suspicion of irregular activity which deviates from the past trends/patterns and concentration of trading at NSE at the member level, then a more detailed investigation is undertaken.
- If the detailed investigation establishes any irregular activity, then disciplinary action is initiated against the member. If the investigation suggests suspicions of possible regular activity across exchanges and/or possible involvement of clients, then the same is informed to SEBI.