Taravaniwalas

In the London Stock Exchange, the members are rigidly divided into two classes, as brokers and jobbers. But in the Bombay Stock Exchange, the classification is not so rigid. Here, the members act either as commission brokers or as taravaniwalas. Taravaniswalas are members of the stokc exchange who transact business on their own behalf. They resemble the jobbers in the London Stock Exchange and the specialists in the New York Stock Exchange. They trade in and out of the market for small difference in price thereby providing the necessary liquidity and continuity of market in securities. They often act as brokers for the public when they do not have any business as a jobber. This helps them to sell their own securities at higher prices. When they act as brokers they can buy securities from their clients at a lower price. They often encroach upon the field of brokers and manipulate the prices of securities against the broker members. In addition, they frequently make false offers and bids and back out of the transactions that are unfavourable to them. Various committees have severely criticized these questionable practices of taravaniwalas. Now, suitable provisions have been included in the Securities Contracts (Regulation)Act, 1956. This Section 15 of the Act reads as follows:

No member of a recognized stock exchange shall in respect of any securities enter into any contract as a principal with any person other than a member of a recognized stock exchange, unless he has secured the consent or authority of such persons and disclose in the note, memorandum or agreement of sale or purchase that he is acting as a principal.

In case he intends to act as principal in a contract with a non-member, he must secure the consent or authority of such a person, and disclose in the agreement or the memorandum that he is acting as principal.