At a time when the Bimal Jalan report on how stock exchanges should be structured and function has been facing criticism from market participants, a survey shows retail individuals are more comfortable with exchanges owned by public institutions rather than one owned by a company.
And, more than half the respondents felt regulation of the exchanges was one of the ‘most important’ aspects of the capital market.
The survey was done by the Centre for Monitoring Indian Economy (CMIE), by polling 5,400 individuals across 23 states. It dwelt on issues such as regulation of exchanges and brokers, ownership, and the monitoring of brokers by regulatory authorities.
The survey says 75.5 per cent of the respondents felt prices were trusted more from an exchange owned by public institutions. A little over half said they’d prefer stock exchanges to function like regulatory institutions.
“These (respondents) were all earning members from households that met one of the following three conditions: had at least one member with a demat account or had an outstanding investment in listed shares or an outstanding investment into mutual funds,” says the CMIE report. “The independent survey... is not funded by any financial market intermediary, any private business conglomerate, any international donor agency or any government agency.”
The survey, though, is in sharp contrast to one study done by IMRB on behalf of MCX Stock Exchange. According to this survey, two-thirds of the respondents felt a corporate entity without trading interest can be an anchor investor. Also, 60 per cent of the respondents believed hiving off the regulatory functions from stock exchanges would be a good idea.
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The Securities and Exchange Board of India (Sebi) constituted the Jalan committee in January 2010 to consider issues with regard to the emerging market microstructure and the evolving role of market infrastructure institutions (stock exchanges, depositories, clearing corporations). The mandate included a review of the ownership and governance structure of such institutions, to ensure they remained relevant and effective.
The panel has recommended sweeping changes in the ownership and governance structure of the country’s exchanges. The report says only banks, insurance companies and domestic financial institutions — which come under the category of public financial institutions — having a net worth of Rs 1,000 crore should be brought in as anchor investor. They can hold 24 per cent stake in an exchange, with a clause to reduce this to 15 per cent in 10 years. All others should be allowed no more than five per cent each.