Deciding that stock exchanges must be allowed to list on the bourses, SEBI has rejected some of the recommendations made by an expert committee it appointed on the issue. No one knows why SEBI did so. Its tersely worded press release on the subject does not offer any explanations.

Meanwhile the country's premier bourse — the National Stock Exchange (NSE) — thinks, sotto voce, that listing a bourse may lead to a clash between its regulatory role and profit motive. But this view has not been made public.

If you track India's financial markets, it is hard to miss the difference in the communication policies of the big institutions that run it.

Contrasting approaches

On the one hand, there is the Reserve Bank of India (RBI). Skim through its website and you will not be left in any doubt about what its thinking is, on any issue impacting the financial markets.

The speeches made by top RBI officials in public forums number over a 100 in the last year alone and these are on the web site. They cut a wide swathe across subjects from regulating mobile banking to systemic risks to the markets. There is even a speech on how to make a career in banking!

These supplement the RBI's quarterly and mid-term policy statements, which discuss threadbare its evolving stance on the economy, key macro variables, inflation and interest rates.

But it is quite another story with the capital markets. Neither the market regulator SEBI nor the country's bourses regularly articulate their stance on the key issues impacting markets. (SEBI's website does have a section on speeches; but the last speech in it goes back to 2006).

The only public documents from which one can gauge SEBI's views are its occasional concept papers. But these are specific to the policy changes being discussed.

In fact, the market regulator and the stock exchanges seem to take a purely functional approach to their role. Take simple information, for a start. Would you like to know how much money flowed into bank deposits till date this year? How much of this was demand and time deposits? Even which States chip with the most bank deposits? You will find the answers if you wade through the reams of statistics in RBI's weekly, monthly, fortnightly and annual releases.

But if you would like to know how much money flowed into the stock markets in the past month or even year, prepare to be confused. True, SEBI presents daily and archival data on FII (Foreign Institutional Investor) and mutual fund investments in stocks. However, look for data on other participants like insurers (who are larger players than mutual funds), and you draw a blank.

Everyone, the Finance Minister included, is worried about the retail investor disappearing from the stock market.

Policy makers are trying to remedy this with new schemes and tax breaks. But there is no actual evidence, at least in the public domain, to prove that the retail investor is losing interest in stocks.

The NSE, which holds the lion's share of equity transactions, is best placed to throw some light on this. And it does have access to data. After all, with 100 per cent electronic trading and state-of-the-art systems for surveillance and data capture, the Indian bourses are among the best in the world on technology.

The stock exchanges also receive statutory updates from listed companies on insider trades, significant shareholding changes, corporate actions and quarterly results. What a goldmine of information!

To complicate matters, numbers provided by different market entities do not add up. For instance, SEBI's number on net FII investments in stocks for a month often doesn't match what the exchanges put out.

It is policymakers who will benefit most from more systematic and co-ordinated data capture on equity markets. For instance, can SEBI not make a good case for curbing Participatory Notes, if it is able to prove that these investors churn their portfolio every day?

RBI's makeover

It is not too late for SEBI or the stock exchanges to evolve a communications policy that is more pro-active.

Until Dr Y V Reddy became its governor, the RBI was fairly indifferent to the importance of public communication too. He, ably assisted by Rakesh Mohan, who was the economics deputy governor, completely changed the template.

The RBI didn't make the transition because it loved the public. It did so because it realised how important it was to counter the rumours on which the financial markets depended in the absence of proper central bank communication.

True, there is a lot that the RBI doesn't put out and there is a lot of scope to simplify the language in which it communicates during its policy reviews.

But in the end, the point is this: if you have the power to move the markets, you need to be more forthcoming. Both SEBI and the stock exchanges fall short on this count. They need to become more transparent in their communications with the public.

This fortnightly column will take a fresh look at issues in policymaking in financial markets and flag the ones that merit a rethink.

>blfeedback@thehindu.co.in

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