Setting an ambitious agenda for this fiscal, Sebi on Wednesday announced it will put in place stringent norms for high frequency trades along with higher penalties for misuse, initiate strong action against auditors for lapses and expressed hope that P-Note users will start directly investing in the Indian market.
The watchdog also plans to seek delisting of over 4,200 listed companies whose shares are not being traded, apart from having an online platform for sale and purchase of mutual funds.
As part of efforts to further strengthen the domestic markets and protect investor interests, the Securities and Exchange Board of India (Sebi) eyes more strong regulations for credit rating agencies that among others will require such entities to disclose reasons for their actions.
Concerned over misuse of the high-frequency or algo trade, Sebi Chairman UK Sinha said a strong set of norms will be in place in 3-4 months to ensure fair opportunity for trading entities.
“While Sebi is among the first regulators to have some kind of regulations in place on HFT (High Frequency Trading), there is a need to make it stronger. We are working on that. “It is not only about misuse of algo trade and co-location facilities, but also about fairness, and we are trying to address the issue. We are now looking to increase penalty for its misuse,” Sinha said at an interaction here.
The regulator will soon be floating a discussion paper in this regard. To weed out shares that are not being actively traded, Sebi will push for delisting of more than over 4,200 listed companies while promoters refusing to provide an exit opportunity to investors will face strict penal action.
In addition, Sebi has warned of stringent action against auditors who turn a blind eye to lapses in financial accounts of listed firms. Setting out Sebi’s agenda for the current fiscal, he emphasised that delisting of these companies is one of the key focus areas. About making norms stricter for P-Notes, Sinha on Wednesday ruled out any concession for hedge funds with riskier profile in Indian markets and stressed that P-Note users should eventually move to direct route of investing in Indian markets. Taking note of the risks posed by possible cyber attacks, Sinha said the regulator is working to address the gaps and will ensure appropriate action is taken soon.
“There are some Government agencies also looking into the aspects of cyber security from the perspective of national security and they have also given us some inputs,” he said. With regard to P-Notes, Sinha pointed out that their share in foreign portfolio investments here has already fallen to a record low of 9.3 per cent.
“From a peak of over 55 per cent in 2007, the share of Offshore Derivative Instruments commonly known as Participatory Notes -- has now fallen to 9.3 per cent. I see this percentage falling even further, going ahead,” he said.