SEBI proposed Mechanism to curb market abuse

SEBI proposed Mechanism to curb market abuse

Market abuse, according to the Reserve Bank of India, includes benchmark manipulation, market manipulation, and information misuse. Currently, there are no laws in place that would regulate and keep an eye on market misuse. As a result, SEBI intervened and introduced a mechanism to stop market misuse.

Details of the Mechanism

• Unauthorized trading will be controlled and monitored by the mechanism.
• It will prevent businesses from facilitating mule accounts.
• Ending spoofing, pump and dump, and disproportionate trading will be the main goals of the mechanism.
• According to the mechanism, brokers and trading firms are required to report to SEBI.
• A list of situations where there are more chances of price manipulation, mis-selling, front-running, etc. has been provided by SEBI.

Terminology used

• Pump and Dump: Increasing stock prices by using deceptive and fraudulent methods In other words, the system seeks to stop the aforementioned behaviours.
• Spoofing: Huge orders are placed on a stock by a trader and are publicly visible to the world. He does not, however, intend to keep them for very long.
• Mule: Receiving and transferring illegal money. Sometimes, persons receiving the money are unaware that the money is illegal. Accounts used to mislead the innocents into getting illegal money are mule accounts.
• Price manipulation: artificially affecting the supply and demand for a company’s product; Goal: To raise or lower the price of the company’s shares.
• Front Running: Illegal practice of buying securities.

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