manipulative trading 3

very interesting...shows some regulation ...

http://www.rediff.com/getahead/2005/jan/03exchange.htm


Let's apply this to the Indian stock market
The Securities and Exchange Board of India, which is the market regulator, has decided there will be two circuit breakers.

One is applicable to the stock market in general and the other is applicable to individual stocks.

~ First, the entire market

The market circuit breakers are triggered by certain movements in market indices (like Sensex and Nifty).

It was activated last year on May 17, when the market plunged after the BJP lost the elections and investors started worrying about the Communist influence on the new government.



The index-based market-wide circuit breaker applies at three stages:

When the index moves up or down by 10 percent
When the index moves up or down by 15 percent
When the index moves up or down by 20 percent
When triggered, these circuit breakers bring all buying and selling of shares in the country to a halt.

The market-wide circuit breakers are triggered by a sharp movement by either the Sensex or the Nifty.

Sensex? What's that?
Here's why the Sensex rises
Should a 10 percent rise/ fall in the Nifty/ Sensex occur
Trading gets suspended for

Before 1 pm
1 hour

Between 1 pm to 2.30 pm
30 minutes

2.30 pm onwards
Trading continues


Should a 15 percent rise/ fall in the Nifty/ Sensex occur
Trading gets suspended for

Before 1 pm
2 hours

Between 1 pm to 2 pm
1 hour

2 pm onwards
Trading is stopped


In case of a 20 percent movement of the index (at whatever time), trading is halted for the rest of the day.

~ On to individual stocks
When applied to individual stocks, circuit filters are known as price bands or price filters.

There are no circuits on the 30 stocks included in the Sensex or the 50 included in the Nifty. These are also known as non-index stocks.

The NSE has price bands of two percent, five percent and 10 percent for specified stocks. If you would like to take a look at this list, you can check the NSE website.

The remaining stocks have price bands of 20 percent.

The BSE has a price band of 20 percent for all non-index stocks, but it often reduces it 10 percent, five percent or two percent depending on the movement in the price of the stock.

The BSE site issues notices almost every day on changes in price bands of individual stocks.

Special attention is paid to illiquid stocks (stocks not traded too much), because the low volumes mean the stock can be easily manipulated.

If you have been watching the news closely, you would have realised how these circuits have come into play.

In fact, out of the total 2,425 stocks traded on (December 28), 441 hit the upper circuit.

Of these, 98 closed at 20 percent higher and 150 others gained between 10 percent and 20 percent against their previous day's closing price.

The Sensex is having a ball!