The ban follows lack of transparency in the off-market negotiated deals which, according to a broker, was used for front-running and warehousing of stocks by a section of the market in connivance with foreign funds. It has been a common practise in the market to take the negotiated route in select scrips which led to suspicion of manipulation of prices.

At present a negotiated deal is allowed for a transaction of Rs 25 lakh or a volume of not less than 10,000 shares. Sebi had earlier decided not to allow negatiated deals below these levels. Such deals were required to be reported to stock exchange within 15 minutes of the trade being negotiated. Exchanges were required to disseminate this information. The negotiated deals had to resultin delivery.

After a meeting of a committee appointed by Sebi, it was decided on Wednesday to effectively ban negotiated deals. A senior Sebi official says these deals lacked transparency and the latest decision will help both transparency and better price discovery.

Says a BSE broker, negotiated deals helped selective participation in such deals. Sebi's measure will avoid such selective participation which left enough room for price manipulation.

A Sebi release said ``Such deals militate against the basic concept of stock exchanges which are meant to bring together a large number of buyers and sellers in an open manner.''

India is one of the few markets which allows negotiated deals outside the normal trading mechanism through stock exchanges, says a broker. The international practice is to allow such deals simultaneously on an open-ended basis. ``But we do not have the necessary software for such a facility. Sebi's decision is a step in the right direction,'' he added.

The market regulator alsosaid the decision will be applicable for trading corporate debt securities. Currently, trading in debt market takes place largely over the telephone and through the mechanism of negotiated deals. The world over the trend is to move away from a telephone-based debt market to a screen based trading system on the exchanges. ``This allows greater transparency, better price discovery, reduction in transaction cost and benefits the investors,'' said the Sebi release. Sebi has decided not to permit negotiated deals in listed corporate debt securities. These deals have to be executed through the normal trading mechanism. Sebi has also clarified that this decision does not apply in the case of government debt securities and money market instruments as they fall under the jurisdiction of the Reserve Bank of India.