Tuesday, May 19, 2009

circuit breakers - artificial interference


Mr Ajay Shah has argued against circuit breakers.
I support this. Why should the regulators interfere? Do we have to wet nurse everyone? Any one who plays the stock market, is a gambler and should be at the mercy of market forces. The job of the regulator is to catch wrong doers and manipulators. If they do that well, they serve their purpose. Instead of abetting manipulation (I think circuit breakers permit manipulation). A compromise could be to see if the markets trade at or near the articifical barrier of 10 or 15 or 25 percent for a minimum period of time, say one hour. By shutting down the market, investors lose an exit opportunity. And to my mind, exit is more important than entry. Every small investor wants to buy and when he loses because he foolishly entered, he cries wolf.

1 comment:

Narasimhan said...

I feel circuit breakers are essential in the Indian context to avoid a bear hammering or a bull run. It is because of such speed breakers that India was saved of the plight of tiger economies of the far east