Keeping the stock market free from gambling

Bangladesh economy does not have any lawful gambling centre except the stock market. That too is not lawful. In the stock market, it is the gamblers who make and unmake the things that happen, especially when it comes to pushing up or down the price of a specific stock.
The gamblers are trendsetters in the stock prices. Other investors, by and large, simply follow them. Interestingly, the gambling is not confined to a few stocks or a class of stocks only; they gamble across the market. That is, at one stage or the other, almost all the stocks will come under the gambling net. Only thing is that nobody knows when and what the gamblers will do. Price setting through gambling leads to price manipulation.
The gamblers join hands in manipulating prices of stocks. Sometimes manipulation takes place on a massive scale. They can get the price of any stock doubled in a very short period of time. Most of the time they succeed in escaping the notice of the regulator or without breaking any so-called securities laws. They place a huge amount of orders of purchase and sale and accordingly, the market prices of the particular stocks move. In the middle, thousands of small investors join the fray and try to gain from the volatile movement of the prices. The success of the gamblers lies in their capacity to allure a large number of ordinary investors to the trading net of those particular stocks.
When gamblers dictate, nobody knows how far the price of the particular stock will go up or down. It all depends on how strongly gamblers are united behind their common interest or where, if stopped, they can escape accusation of breaking the securities laws.
Who are the gamblers? They can be big individual investors, mutual fund managers or institutional portfolio investors. To be a gambler, one needs monetary power and also the instinct of gambling. Gamblers do not change or do not give up; they enjoy the gambling. Perhaps they cannot invest in anything without gambling. They are the big traders on the floor of the stock exchange. They join together and spread the rumour that the price of a particular stock will go up to that level - at least, it will hover around that level. For spreading rumour, they use a group of investors as messengers, dot.com companies, sms, whispering, etc. They work under oath and trust-breakers cannot remain with them.
Do the gamblers lose? Yes, they do, but it is believed that they win more than what they lose. In some cases, the fuel for gambling comes from the sponsors of a particular company; they encourage the gamblers of the market in various ways with an objective of selling their own shares at the gambler-driven high prices. Between August and September of 2014, some stock prices simply got doubled or more, though there was no change in the fundamentals of the concerned companies.   
Many investors say, gambling is a part of the stock market investment everywhere in the world. They say without some kind of gambling, the stock market will remain dry; gambling infuses life and brings excitement in the market. Gambling, they add, keeps the market vibrant and going. Though the above assertions are true to some extent, gambling is contained everywhere in the world for the sake of protecting the greater interest of the market itself.
Gambling leads to scandals. Gamblers hardly can defeat big investors or the sponsors of the companies; they defeat the other co-investors only, who are in most cases small in monetary power. If the small co-investors are beaten hard, they give up and leave the market. Then a long and prolonged bearish spell starts to grip the market. For months or years, the market remains dysfunctional after gambling-driven scandals.
The small investors should not join the gambling fray if they do not know how to go along with it and protect their own interest. Ordinary investors do not possess the qualities or requirements of becoming good gamblers.
An important duty of the regulator is to keep the market free from gambling. If the gamblers can ride out easily, then the very fundamentals that determine price of stocks will become
useless.
Speculation and gambling are different things. The former is a part of stock market investment strategy, but gambling is not a recognised act of investment. However, speculative gambling is there everywhere in the stock markets. There is a difference between speculative gambling and outright gambling. The latter is denounced by most people as an evil act.

The writer is Professor of Economics, University of Dhaka,
 abuahmedecon@yahoo.com