India’s oldest exchange, the Bombay Stock Exchange (BSE), has approached the Securities and Exchange Board of India (Sebi) for listing its shares. Sources said the listing would be through an initial public offering. This will make BSE India’s first listed exchange.
The agenda paper of a recent Sebi board meeting said, “Many exchanges are actively contemplating seeking permission to list their shares. One exchange has submitted a preliminary proposal.” A BSE spokesperson refused to comment.
While there are no clear guidelines for listing a stock exchange either on its own or its rival’s trading platform, the agenda paper has made a proposal for self-listing.
Sebi has suggested three models for coping with any possible conflict of interest arising out of self-listing. These are committee model, company model and independent company model.
Sebi, on its part, seems to be favouring the company model. “It is felt that in the current scenario, the company model may be more suited to the requirements of self-listing,” it said.
Under the company model, a wholly-owned subsidiary of the exchange will be entrusted with monitoring the conduct of the market players and their compliance with the exchange’s operating rules. The securities regulator will step in at the time of any conflict.
As on March 31, 2009, six foreign investors, including Deutsche Borse and Singapore Exchange, held 25.65 per cent in BSE. Dubai Financial Group LLC owned 3.92 per cent while State Bank of India and Life Insurance Corporation held 4.9 per cent shares each. A little over 62 per cent of the shares are widely held. Among key Indian shareholders are Bajaj Holdings and Investment Ltd, which owns 2.94 per cent, Infosys Technologies Ltd’s CEO and MD, S Gopalakrishnan, who owns 1.04 per cent, and Bennett, Coleman and Co, which owns 1.04 per cent. The listing will help boost the valuation of the exchange and provide investors an exit opportunity.
Sebi had asked the 134-year-old exchange to put its house in order before a listing could be considered. Since then, BSE has been taken several initiatives. It is investing heavily in technology. Over the years, BSE has been losing out to NSE on the technology front and new players such as Financial Technologies, which are trying to ride the technology path while setting up the MCX Stock Exchange. Although BSE has more companies listed on it than NSE, it has lost the top slot in terms of turnover.
The listing could also pave the way for several financial investors to exit at an attrcative valuation.
BSE members have been asking for a listing saying this will result in better price discovery and provide shareholders an opportunity to exit their investments.
