SEBI launches Mechanism to curb market abuse

February 8, 2023

The Reserve Bank of India defines Market Abuse as misuse of information, benchmark manipulation, and market manipulation. Today there are no regulations to monitor and control market abuse in the country. Therefore, SEBI has stepped in and launched a mechanism to put an end to market abuse.

About the Mechanism

The mechanism will monitor and control unauthorized trading
It will stop firms from facilitating mule accounts
The mechanism will focus on ending spoofing, pump and dump, and disproportionate trading
The mechanism says that the brokers and trading firms should compulsorily report to SEBI
SEBI has given a list of instances where there are increased possibilities of price manipulation, mis-selling, front running, etc.

Terms used

Front Running: Illegal practice of buying securities
Price manipulation: Affecting the supply and demand of a company product artificially; Purpose: To increase or decrease the price of the stock of the company
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
Spoofing: A trader places huge orders on a share; publicly visible to the world. But his intentions are not to keep them for long
Pump and Dump: Boosting stock prices through fraudulent misleading ways

In short, the mechanism aims to put an end to the above practices.

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