Do Operators Run The Stock Market

Do Operators Run The Stock Market
There is a general belief amongst most investors that markets are controlled by operators and it is no place for smaller investors. It is believed that the operators enriched themselves at the price of small investors. Two scams of 1992 and 2002 had certain operators at the center of the storm. There had been other star players in the market place also in the past that had a huge function to play in the market place movements. Let us examine the validity of the statement that Stock Markets are run by operators.
An operator is a individual who is supposed to drive the market place price tag of a specific share that is he decides what really should be the pricing of the share and no matter whether it should really go up or down. It is also believed that operators in association with the management of the corporation very first acquire specific stocks in the marketplace and subsequently via rumors and such other communication mechanism make a mass interest in the share. Subsequently as soon as the common public begins believing in the companys prosperity the operators sells the shares and makes handsome income. Some operators also use circuit mechanism of stock exchanges to hike the cost. The circuit mechanism makes it possible for the operator to place an order at a value which is 3 to 8% above the previous days closing. Once the share hits upper circuit there are incredibly few sellers in the market place considering the fact that they think that if the share has hit upper circuit it is most likely to go up further. This is the modus operandi of an operator. For an operator to be profitable some components are quite 
essential. Such as connivance with the management, low capital base of the firm so that manipulation can be completed with highly little capital and a mass following.
Is manipulation probable in high volume shares? Let us now appear at the trading statistics reported by stock exchanges (data of a particular date). Top 30 scripts i.e. ten in every single group, account for 41% of turnover in NSE and 37% of the turnover in BSE. Each the Exchanges put together this translates in to a value of about 4100 crores on a everyday basis. As per the market place share reported of brokers by NSE (NSE Bulletin) top 10 trading members account for just 24% of the marketplace share i.e. on an typical every broker would have about two.four% of the market across all company shares traded by the firm. Therefore, the dominance that a single broker can have on the volumes in the industry is minimal in highly traded scrips.
Then we move to low value high volume traded scrips. As per the data is provided by newspapers separately on Quotations page, the aggregate value of shares traded in this category on a certain date was studied. The turnover for BSE in such scrips was Rs.34,03,470 i.e. .01% of total turnover and for NSE is Rs.20,28,050 i.e. .003% and in terms of number of shares traded it is 1.five % in case of BSE and in case of NSE .45%. This is one location where low funds can support to move the rates and give a false sense of liquidity. Hence investors are advised to refrain from investing in scrip just because it is low value the merit of the share should be looked into prior to making the investments.
The Stock exchanges have a system of guiding the investors on stock selection by way of classifying the firms into numerous groups. A group stocks are extremely liquid and superior performing organisations. B1 group are once more very good performing organizations with lesser liquidity then A group stocks. B2 are stocks that have low capital bases and less liquid. Companies that do not adhere to Listing agreement are categorized as Z group. These providers do not attend to investor complaints and fail to file a number of investor related specifics with the stock exchange such as quarterly operating, book closure dates and so forth. Shares which have concentrated activity and unusual price movements are categorized in T 2 T or trade for trade settlement, ie just about every sale and purchase should result in delivery and positions can not be squared off in the course of the day. This classification should be kept in thoughts although picking a organization for investment. Stock exchanges also verify the news items appearing in major
newspapers and get companies to clarify on rumours. This data is also of essential value considering that operators and organization managements at occasions plant false stories in newspaper to mislead the public.
Special laws have been put in spot to act as deterrent to such manipulation. The Insider Trading Regulations and Fraudulent and Unfair Trade Practices regulations are the tools readily available to SEBI to taken action against those manipulating the markets. The punishment is maximum penalty of Rs. 25 crores and imprisonment. Each these laws have been enacted in early 2000. Hence their effectiveness will be proved only with efflux of time. Till the enactment of these laws the prosecution of persons indulging in market manipulation had to be tried below the general legal process, the delays in the similar are not unknown to us.
We constantly blame the regulators, brokers and exchanges if scams come about in markets. In spite of this the menace of operators will go only if we stop following their leads in the market place. Techniques given by operators are widely followed, and so lengthy as you make money on these recommendations we do not blame any one. However as soon as the operator weakens then there is fall in rates and the blame game starts. Operators are creations of society and the greed inherent in all of us. Easy cash by riding the operators ideas is a powerful attraction. Scams bring down the costs of not only the shares which were manipulated by the operators but also all other fundamentally very good shares also held by us. Mass following that the operators thrives on would be absent if we refrain from obtaining those shares that are remotely associated with any operator. Reporting wrongful activities of organization managements, dabba traders and other market place participants will help the regulator in directing their efforts on the incorrect doers. Bear in mind, becoming a spectator to a wrongdoing and not reporting the identical is as poor as committing the crime.