Mumbai: Expressing concerns over malpractices in equity trading, finance minister P. Chidambaram on Saturday said there is a need to demystify the functioning of stock market and deal with insider trading issues to inject confidence in retail investors.
“It is important that we have to demystify the operations of the stock market. We have to make sure that there are no malpractices like insider trading. Only then the retail investors will come to stock market in very large number,” he said.
Chidambaram was speaking after inaugurating the new stock exchange MCX-SX, which will begin trading on Monday.
As a word of caution to the two major bourses—NSE and BSE—and the new one MCX-SX, Chidambaram said they should endeavour to keep the products simple which could be easily understood by small investors.
“If you want retail investors in India to participate in the stock market, especially in the equity market, you have to keep the product simple and inject confidence in the investor that the integrity of stock trading in preserved,” he said. Admitting that there are malpractices in the Indian stock market as there are elsewhere in the world, the minister regretted that “we discover a few of them and punish virtually none”.
He further said that regulators should be one step ahead of “innovation” by manipulators.
“In fact the crisis 2008 can be attributed to the fact that the innovators remained one step ahead of the regulators. And in the US they say that regulators were sleeping on their job. I would therefore urge that regulators always remain one step ahead of the innovators,” Chidambaram said.
India has the largest number of listed companies in the world, he said, adding that stock markets would become more competitive with the entry of MCX-SX.