Trade Current Affairs - 2019
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The Market regulator Securities and Exchange Board of India (SEBI) has barred National Stock Exchange (NSE) from accessing the securities market for six months and also imposed a fine of ₹1,000 crore on NSE in co-location case.
- Co-location refers to system wherein a broker’s server is kept in the exchange premises to reduce latency (as it directly influences the amount of time trader takes to interact with market), or delay in computing terms, while executing trades.
- In 2015, SEBI received complaints against NSE in which it was alleged that the system used by NSE to disseminate data through co-location facilities was partial, as it allowed users to get information before others and thereby created an information asymmetry between users.
SEBI’s verdict in Co-Location Case:
- As inspected under the SEBI ‘Prohibition of Fraudulent and Unfair Trade Practices rules’ (PFUTP) Regulations, NSE was found guilty of committing fraudulent and unfair trade practice and it also did not exercised requisite due diligence while putting in place the TBT (tick-by-tick data feed) architecture, thus affecting market fairness.
- SEBI has barred the NSE from accessing the securities market for six months as its actions.
- It has fined NSE for almost ₹1,000 crore (i.e. ₹89 crore plus 12% interest) from 1 April 2014 for its alleged failure to exercise proper due diligence while offering co-location facility.
- The disgorgement amount is required to deposited in Investor Protection and Education Fund (IPEF).
- It also directed former and current top employees in the management of exchange to not hold any position in a stock exchange for a period of two to three years.
Note: NSE has the largest market share in equity segment and almost a monopoly in equity derivatives.
The World Bank-ILO report titled Exports to Jobs: Boosting the Gains from Trade in South Asia has been released. The report studies the effect on local employment and wages of changes in exports by combining disaggregated data from household-level or worker-level surveys with trade data from India and Sri Lanka.
Key Observations made in the Report
- Increasing exports together with leading to better jobs and higher wages in India will generate more formal sector employment for youth and women.
- Increasing exports would boost average wages and the biggest beneficiaries of this wage gain would be the high-skilled, urban, more experienced, and mainly male workers.
- For low-skilled workers, there would be an increase in formal jobs.
- Exports can improve the performance of local labour markets. Hence labour market policies must aid different groups of workers to acquire the right skills and ensure that the gains of increased exports are shared more broadly across society.
India and Boosting Exports
- India’s growth rate of 7.2 per cent in 2017 reduced the number of people living in poverty.
- Even then, most Indians doesn’t have regular jobs in the formal economy and differences in wages across regions and in the quality of employment opportunities prevail.
- India’s trade has been reduced from 55.8 per cent in 2012 to 41.1 per cent of the Gross Domestic Product between in 2017.
- Indian exports which are mainly capital intensive like chemicals and fabricated metals reduces the direct benefits to workers.
- The report notes that India can ensure that greater export orientation can boost workers’ gains from trade and spread them more widely, so benefiting disadvantaged groups.
The report also concludes that more exports can create benefits for workers by raising wages and reducing informality and this requires stronger policies to ensure these benefits reach everyone in the labour market and don’t leave any groups behind.