Sebi paves way for FMC merger

To place report for interoperability of clearing corporations for public comment

The Securities and Exchange Board of India (Sebi) on Monday paved the way for the merger of the markets regulator with the Forward Markets Commission (FMC). According to a press release issued by Sebi, its board has cleared the norms for commodity exchanges and brokers.

“Major compliances include norms related to net worth, shareholding, composition of the board, corporatisation and demutualisation and setting up various committees, turnover and infrastructure,” Sebi said.

To ensure a non-disruptive transition, Sebi has prescribed a timeline for aligning with the different provisions of the Securities Exchanges and Clearing Corporations (SECC) regulations. Regional commodity exchanges would have to be corporatised and demutualised within three years of the merger.

Currently, commodity exchanges don’t have a separate clearing corporation for contracts, a requirement under the Sebi Act. The markets regulator will give commodity exchanges up to three years to comply in this regard.

National commodity exchanges will need a net worth of at least Rs 100 crore by May 2017, while regional stock exchanges have to adhere to the norm within three years of the merger. As FMC norms on shareholding are similar to requirements under the Sebi Act, the markets regulator has given the same window given by FMC — May 2019 — to national exchanges. Regional exchanges have to comply within three years of the merger.

Commodity brokers compliant with commodity exchange bye-laws will be allowed registration with Sebi. They will have to apply within three months of a notification in this regard. The markets regulator, however, added these entities would have to comply with Sebi regulations, including on net worth and track record, within a year.

At its board meeting, Sebi also cleared market-related issues such as those relating to anchor investor in a public issue. “In case of allocation beyond Rs 250 crore, there can be 10 additional investors for every additional allocation of Rs 250 crore, subject to a minimum allotment of Rs 5 crore per anchor investor,” it said.

Listed companies with employee benefit trusts will have to re-classify the shareholding of ‘trust’ as a ‘non-promoter and non-public’ category. Also, these have to be compliant with minimum public shareholding within three years.

The regulator also decided to put two market issues in the public domain for comments, including on interoperability of clearing corporations and exemption from an open offer when voting rights increased due to forfeiture of shares.

The Sebi board also cited a report on clearing corporations by New Development Bank chief K V Kamath. The report delved into the issues of interoperability, investment in clearing corporations, review of transfer of 25 per cent profit of exchanges and depositories to Clearing Corporation and an investor protection fund.