Ketan Parekh was banned once again for front running on stocks based on advanced news flow about institutional orders. SEBI has alleged that Ketan and his accomplice at an FPI in Singapore used advance order information from US based FPIs to take large personal trades and make a killing out of it. This modus operandi is nothing new and has been happening for long. The sad part is the brazen manner in which this continues with just the cast of the play changing. 

The arrangement was quite simple and has been used for a long time. A trader sitting in a reputed FPI outside of India gets advance information about large buy or sell orders on a stock. This info is passed on to an infamous broker like Ketan Paresh, who then not only takes a long or short position for himself but also for the trader who passes on the data to him. This is illegal on multiple counts. It is breach of client trust and it is also an infringement of insider trading rules in India, since a trader has access to privileged information and cannot use for personal gains. However, that is now treated as one of the perks of the job. 

However, this scam does not stop at Ketan Parekh and the Singapore based trader, Rohit Salgaocar. There are other players too. Ketan Parekh also gets few of the leading domestic brokers in India with a strong US institutional customer franchise to give them leads on a quid pro quo basis. Surprisingly, many of the brokers have been doing the same and for now, they have only been warned by SEBI to do better due diligence. It is hard to fathom how this will change the situation. Also, Ketan Parekh is not any ordinary broker, but the brain behind a mega scam in 2001. It is surprising that traders are brazen enough to go ahead and still engage and cosy up to him! 

A senior trader once told me at the time of the Axis MF front running case that the regulator will make some noise, the SAT will dismiss the case for absence of evidence, the scamsters will be back and things will be sordid as usual. If the Indian market has to be a more credible way to allocate capital, then this awful brazenness of dealers and traders has to go. We seem to make a lot of noise on compliance but at a grassroot level, the implementation is just too lax. Insider trading is not an Indian phenomenon, and it exists everywhere in the world in some form. However, it is the brazen way in which the law is broken time and again, which is unique about India!