Mumbai: Several hedge fund managers have formally approached the Securities and Exchange Board of India (SEBI), urging the regulator to investigate alleged market manipulation that has been impacting their trading profits. The complaint comes amid rising concerns about unusual trading patterns, heightened volatility, and suspected price rigging that hedge funds claim are distorting the market dynamics.
Hedge Funds Facing Profitability Challenges
Over the past few months, hedge fund managers have reported increased difficulties in executing profitable trades, citing sudden price swings, abnormal order flows, and suspected coordinated trading activities that create an unfair playing field. These issues, they argue, have led to significant losses and undermined their ability to generate returns for investors.
A senior hedge fund executive, on the condition of anonymity, stated, “We have observed erratic market movements that do not align with fundamentals or standard trading behavior. Certain stocks witness sharp price fluctuations within minutes, making it nearly impossible to execute trades effectively.”
Allegations of Algorithmic Manipulation and Pump-and-Dump Schemes
Sources indicate that hedge funds suspect the involvement of high-frequency trading (HFT) firms and algorithmic traders in manipulating stock prices. There are concerns that some market participants might be using predatory algorithms to trigger false breakouts and trap investors in losing trades.
Additionally, reports suggest that some small and mid-cap stocks have been subjected to pump-and-dump schemes, where stock prices are artificially inflated before being offloaded, causing significant losses for unsuspecting traders.
SEBI’s Potential Course of Action
In response to the complaints, SEBI is expected to conduct a preliminary review of the trading data and analyze patterns to identify any irregularities. Market experts believe that the regulator may introduce stricter surveillance measures, algorithmic trading audits, and tighter controls on order execution to prevent manipulation.
A former SEBI official commented, “Market manipulation is a serious concern, and SEBI has a strong track record of taking action against such practices. If evidence of wrongdoing is found, stringent penalties and regulatory interventions can be expected.”
Industry Seeks Transparency and Fair Trading Practices
With hedge funds playing a crucial role in providing market liquidity and price discovery, they are now urging SEBI to strengthen its oversight and introduce reforms to ensure fair trading conditions. The outcome of SEBI’s potential investigation will be closely watched, as it could have far-reaching implications on market integrity and investor confidence.
