Volumes stump Sebi surveillance plan

Technology panel moots upgrade of the system

MUMBAI: The Griffin Chemicals share soared 1,820% on relisting after six years last Wednesday. Coming on the heels of similar relisting day pyrotechnics by KGN industries and Sylph Technologies and the consequent warning by the Bombay Stock Exchange and a Securities and Exchange Board of India investigation last month, the Griffin gallop brings to light the absolute contempt that market operators have for the regulators.

Part of the blame goes to the inefficiency of the much-publicised integrated market surveillance system, say experts.

Sebi’s market surveillance, which already suffers from a shortage of trained staff, has now got into technical hassles too.

The spurt in volumes over the last three years has found surveillance systems wanting.

“The stock market is booming. The valuations may be going down, but the number of transactions has increased manifold,” noted Deepak B Phatak, chairman of Sebi’s standing committee on technology issues.

The committee has recently reviewed and suggested upgrades to Sebi’s integrated market surveillance system (IMSS), which was implemented with much fanfare in December 2006.

Phatak, who chairs the committee, told DNA Money, “Three years ago, when we conceptualised the system, the volumes were around 6-7 million trades a week. We had then expected the volume to double in 3 years and provided for volumes of 15 million trades.”

But, upsetting these calculations, trade volumes have exploded and are currently estimated to average 45 million, three times the original projection.

“Last week, we did a review and have estimated that the number of transaction might touch 100 million in three years. Therefore, we have recommended changes in hardware and addition of other infrastructure required to handle this kind of traffic,” Phatak said.

However, he said the software and applications are up to the mark and do not need any upgrade.

The changes recommended are likely to be implemented over the next two months, Phatak said.

The technical problems in IMSS add to the existing manpower issues the system faces.

According to a December 2007 report by USAID, an agency for international development, “Sebi lacks the required level of trained staff to conduct effective surveillance, investigation and enforcement... More staff and significant additional training are required”.