Evolving watchdog in new market

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SummaryMarket regulator Sebi turns 25 today.

A look at how it has changed the financial sector, and what else it needs to do

On a hot summer day in 2009, the National Stock Exchange completed 192.25 crore share transactions. The markets had reached a high of 4,509, yet all trades were squared off within an hour of the closing bell on May 19, 2009.

Till a few years earlier, any jump of that sort would have made the surveillance officers at the other glass façade building at Mumbai’s Bandra Kurla Complex, too, jump. But the officers at Securities and Exchange Board of India could shut their terminals for the day.

Sebi, set up through an executive order in 1988, leading to an ordinance in 1992 and subsequently an act, turns 25 on Friday.

For years, the Indian equities market had remained wary of any bull run. It happened in 1993, in 1999 in 2001 and even in 2003, but scares of that sort have now become history as Sebi has evolved —its act has undergone changes as late as this year — along with the stock markets. It has found new rogues, but one of its biggest achievements has been creating the conditions where the size of the market has become too big for any single entity or group to hold it to ransom.

“Our big challenge was to shift the centre of gravity of the markets from the ministry to an independent regulator,” recalls P J Nayak, who in the ’90s was joint secretary (capital markets) in the finance ministry.

Along with setting up Sebi, the government allowed the entry of foreign institutional investors (FIIs). From less than a dozen in 1993, it has now expanded into a growing club of over 1,770.

Surveillance systems, which at one time meant carrying sheaves of weekly trade to the Sebi office, have now become one of controlling algorithmic trading, and the exchanges themselves have changed. Bombay Stock Exchange, once number one, is now a distant second to National Stock Exchange, the child of liberalisation, and regional exchanges are now valuable only for their cash reserves.

A young investor in today’s changed environment would be taken aback if told, as he would have been two decades ago, that a stock exchange would take 15 working days to settle his transaction, or that the brokerage charged would be around 2 per cent.

Some things do not change. The markets are still dominated

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