 "Self-listing of exchanges pose conflict of interest risk: Sebi")
As per Sebi rules, an exchange cannot list its shares on its own platform and it has to go to another bourse for listing to avoid any conflict of interest that might arise while discharging its duty as a front-line regulator for the securities markets.
While leading stock exchange BSE is agreeable to the idea of cross-listing and has also got in-principle approval from Sebi (Securities and Exchange Board of India), the rival NSE is opposed to it and wants to go for self-listing while undertaking a restructuring exercise for complete separation of its commercial and regulatory functions.
More From This Section
Asked about the issue and whether Sebi was open to review its norms to permit self-listing by exchanges, Sebi Chairman U K Sinha said the current law is very clear that self-listing cannot be allowed.
"Stock exchanges in India and many other countries have multiple functions. One key function is to be a regulator for all brokers and an exchange is the first-line regulator for them. They are also a regulator for the listed companies.
"If you are a for-profit company and if you are expected to take action against those entities from whom you get your revenue, there is a very likely conflict of interest.
"The Bimal Jalan Committee (which looked into ownership and governance norms of stock exchanges) had in fact recommended that there should not be a listing.
"However, it was felt that it should be allowed as globally stock exchanges are listed and we can have safeguards -- that is no self-listing. That is the current law and to say that I am willing to change that law, that would be difficult for me to say," Sinha said.
"This is the current law -- one exchange has accepted it, there is another exchange which was earlier a commodity exchange but now technically is a stock exchange is not listed on its own platform," he said.
While Sinha did not take any names, Multi Commodity Exchange (MCX) had got listed earlier when it was only a commodity derivatives exchange, but has now become an overall securities bourse following change in regulations that came into effect pursuant to merger of erstwhile commodities regulator FMC with Sebi late last year.
"One is already listed, another is agreeable to it and if some exchange has some problem, we will see whether the problems are genuine or not and what are the solutions. But this issue of conflict of interest that is very very evident and clear has to be addressed," Sinha said.
To another question on whether Sebi was looking at regulating the incentive structures for top management of exchanges, including volume-linked bonuses, Sinha said there was no such proposal.
He, however, said that corporate governance norms in this regard are much more tougher in case of exchanges.
"Since they are our regulated entities, what we have provided is that there can be no ESOPs for an MD or a board member or a key management person. They can get a bonus but not the ESOPs. Even on bonus, it can not be more than 50 per cent of the fixed pay," he added.