Shares of Bombay Stock Exchange (BSE) have lost more than 15 per cent of their value after the Bimal Jalan committee last month recommended that stock exchanges not be allowed to list and their profits be capped.
Shares of Asia’s oldest equity bourse are changing hands at below Rs 325 a share in off-market deals, brokers familiar with the matter said. In August, billionaire investor George Soros’ Quantum hedge fund picked up 4 per cent stake in BSE at Rs 375-380 a share.
The BSE Brokers’ Forum, which represents 540 bourse members, has decided to oppose some of the recommendations of the Jalan committee. “We are concerned with some of the recommendations like not allowing stock exchanges to list, restricting their profits and not allowing trading members on the board of the exchange,” a senior official said.
“The demutualisation scheme, which was approved by Sebi, allows the listing of the stock exchange and having trading members on the exchange’s board,” he added. BSE brokers own 44 per cent stake in the exchange.
| STOCK SHOCK * BSE Brokers’ Forum plans to oppose some of Jalan committee’s suggestions * Brokers say demutualisation scheme of Sebi allows listing & trading members on board * IIM’s Verma says allow listing but transfer work of oversight to Sebi or any other entity |
The corporatisation and demutualisation of stock exchanges, mandated by market regulator Sebi in 2004, requires that at least 51 per cent of shares be held by non-trading members of the exchange. BSE completed its demutualisation in May 2007 by facilitating the sale of the 51 per cent stake of its broker-members.
“I think listing should be allowed. But the regulatory oversight that stock exchanges normally perform over listed companies should be carried out by Sebi or a separate listing authority,” said Jayanth Varma, professor of finance at Indian Institute of Management-Ahmedabad and a former Sebi executive director.
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“The whole idea of demutualisation of exchanges was to move from a user-owned structure to an investor-owned structure. This requires that investor rights must be respected,” he added.
On the issue of capping profits, Varma said: “If an exchange is excessively profitable, that means there is inadequate competition. The proper response is to facilitate competition. Without a profit motive, managers of a private entity have no performance measure and no accountability.”
Interestingly, the Sebi committee appointed to look into the issue of corporatisation and demutualisation of stock exchanges was in favour of listing stock exchanges. “It would be desirable for demutualised exchanges to list its shares on itself or on any other exchange. However, this may not be made mandatory; in case the exchange is listed, the monitoring of its listing conditions should be left to the central listing authority or Sebi,” the committee, headed by M H Kania, had recommended.
Sebi has invited comments on the Jalan committee report until December 31.
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