In the wake of raging debate over the proposed new norms for ownership and governance of stock exchanges, the Securities and Exchange Board of India (Sebi) may consider making listing optional for bourses and separating their regulatory and business roles.
The market regulator was considering whether the bourses could be asked to put in place ‘Chinese Walls’ between their regulatory and corporate functions, a senior official said.
The move was aimed at keeping the front-line regulatory role of bourses unaffected by their profit-making and other business interests after they became publicly-held companies, the official added.
Ever since a Sebi-appointed committee, headed by former Reserve Bank of India (RBI) governor Bimal Jalan, gave a report late last month on the ownership and governance of stock exchanges, there has been a heated debate over various proposals.
The committee has suggested sweeping changes in the way exchanges function. One of the key proposal is not to allow bourses to get listed in order to to safeguard their front-line regulatory role.
The committee recommendations, put out by Sebi for public comments till the month-end, have faced severe criticism from various quarters, including industry chambers and many market participants, including the Bombay Stock Exchange, the country’s oldest bourse, and the new entrant, MCX-SX.
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The official, speaking on condition of anonymity, said Sebi would take into account all the feedback it had received – from the government, public, industry chambers and media – before taking a final call. He added the report had not been discussed by the Sebi board so far. The board will consider the report, as well as the feedback on its various proposals, at its next meeting, expected to be held next month.
The regulator will also take into account the fact that the response was not good enough when the Jalan committee had sought feedback before putting forth its proposals. The high-level committee gave its report about six months after it was set up, but received only 29 responses to a questionnaire it had floated seeking comments from the public and various market players.
The committee suggested that listing, as well as high profitability, could come in the way of the bourses’ regulatory role, as they are supposed to act as a front-line watchdog for market activities. Besides, the bourses also execute various regulatory and market development measures adopted by Sebi.
After analysing the feedback received so far, Sebi is considering whether it could be left for individual exchanges to decide on whether to list or not. At the same time, Sebi is also considering the idea of segregating the regulatory and corporate roles of the bourses, but it has not yet been decided how this can be done.