Sebi bats for independence of clearing corporations from stock exchanges

Regulator proposes measures to diversify ownership, other reforms

The Securities and Exchange Board of India (Sebi) on Friday proposed disinvestment or diversification in the ownership of clearing corporations (CCs), which are currently 100 per cent owned by stock exchanges.

 

 In a consultation paper floated on Friday, the markets regulator called for the independence of CCs from their parent exchanges.

 

At present, there are two CCs in the equity market owned by the BSE and the National Stock Exchange. Other CCs cater to the commodity market and the debt market.

 

CCs help in the confirmation, settlement, and delivery of transactions for an exchange. Under interoperability in India, CCs can clear and settle trades across multiple exchanges.

 

“Diversifying the ownership of CCs operating in interoperable segments away from the parent exchange would help strengthen the financial and operational independence of a crucial set of MIIs, ensure they operate primarily in the public interest, ensure a level playing field across MIIs, and reduce system-wide reliance on a single large entity,” Sebi said. 

 

The market regulator is of the view that CCs should be able to independently finance appropriate investments in technology, operations, human resources, and maintain their settlement guarantee fund (SGF).

 

Sebi has proposed that CCs could retain 49 per cent of their holdings, while exchanges should be provided with a five-year window to bring down their stake from 51 per cent to 15 per cent by selling shares to other entities.

 

“Alternatively, the entire shareholding of a CC could be allotted to the existing shareholders of exchanges, who would then be free to trade their shares in the CC. This would allow for a clean break of the CC from its parent exchange, in a manner that is fair to the existing shareholders of the parent exchange,” Sebi said.

 

Sebi has also proposed changes in the profit and dividend distribution of CCs. However, it has maintained that CCs will not be allowed to list on exchanges, maintaining the status quo on the current norm restricting their listing.

 

The regulator has also advocated for the consolidation of CCs.