Of late, the hedge funds have grown out of bounds in the global markets. The domestic markets have also seen a surge in these instruments but at times they have led to market failures. The recent spate of the UBS Securities opens up another episode where the regulator has made its presence felt by restricting the entity from trading in the Indian markets for the next one year. This article deals with related issues.

It was the unforgettable May 17, 2004, (some call it Black Monday), the Sensex crashed by 567.74 points, Nifty fell by 196.90 points, and in the intraday trading Sensex fell by 842 points.

The sudden fall in the stock market led to a temporary halt in the trading activities twice during the day on both the major stock exchanges of the country. The Securities Exchange Board of India (SEBI) carried on investigation for almost a year, which led to a remarkable revelation. It was found that UBS securities Asia, a registered Foreign Institutional Investor (FII) sold securities worth Rs. 188.35 cr in the cash market segment and was found to have played a significant role in the market mayhem. To add to the regulator's woes, it was further found that one of the investors of the participatory notes (sold by UBS) was a hedge fund named Caxton International. UBS was barred from participating in the capital market in the next one year.

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