Improve Supervision Before Allowing New Exchanges
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In January this year, we were finalising the final proofs of our new book
Absolute Power which documents the path-breaking rise of the National Stock Exchange (NSE) and the transformation it brought to the Indian capital markets. Parallel to NSE’s meteoric rise, India’s 23 stock exchanges and two national exchanges, the OTC Exchange of India and the Inter-Connected Stock Exchanges of India, disappeared leaving three survivors, with NSE enjoying a near-monopoly and the regulator too timid to supervise it effectively.
Arrogance, hubris and regulatory capture accompanies NSE’s rise. We have documented how the Exchange has been allowed to bypass almost every rule that governs exchanges -- appointment of key management persons, acquisitions, absence of standard operation procedures, influencing policy in its favour, destroying competition and, of course, permitting the infamous algo-scam that I exposed in 2015, based on a whistle-blower’s disclosures. It revealed how officials of the Exchange colluded with select brokers and allowed them to profit enormously by logging in first or to co-location (Colo) servers that had lower traffic.