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Stock exchanges operating in the new International Financial Services Centre (IFSC) will be exempt from crediting 25 per cent of their profits to the Settlement Guarantee Fund.
This is seen as a move to help ease capital raising, as well as redeployment of profit in the existing business.
The Securities and Exchange Board of India (Sebi) on Friday notified guidelines for entities which will operate in the IFSC, located at the under-construction GIFT (Gujarat International Finance Tech) City between Ahmedabad and Gandhinagar in Gujarat.
The norms are designed to be less stringent than the regular ones, as they aim to bring the international market for Indian financial products onshore and to raise the foreign participation in Indian capital markets. Ownership and net worth requirement norms for stock exchanges and related entities have been relaxed by Sebi.
The norms apply to both foreign and domestic bourses, depositories and clearing corporations. Any of these entities looking to start operations in the IFSC will be allowed to do so through the setting up of a subsidiary. The exchange, depository or clearing corporation can own at least 51 per cent in such an entity.
“...and remaining shares may be held by any other recognised stock exchange or clearing corporation (or depository), whether Indian or of foreign jurisdiction,” said the Sebi notification.
The initial net worth for a stock exchange or a depository in the IFSC is Rs 25 crore, with the condition that it will be raised to Rs 100 crore within three years of operation.
The decision to allow exchanges to retain capital is being seen as a positive. “It will be easier to plough back capital for business improvement…capital raising could also be helped,” said one exchange official.
For a clearing corporation, the net worth requirement is Rs 50 crore at the beginning, which has to be enhanced to Rs 300 crore in three years, the notification said.
Portfolio managers in the IFSC can trade only in securities listed outside India or those listed in the IFSC.
The guidelines mandate that all debt securities will have to be listed in at least one exchange operating in the IFSC.
“The issuer of debt securities in IFSC shall prepare its statement of accounts in accordance with the Companies Act, 2013, as applicable in IFSC,” said the Sebi notification.
Further, investors of alternative investment funds and mutual funds in the IFSC are allowed to invest in foreign currency.
“An asset management company of a mutual fund operating in IFSC shall have a net worth of not less than $2 million, which shall be increased to $10 million within three years of commencement of business in the IFSC,” said the notification.
Sector officials said tax exemptions for foreign entities are expected to be announced by the government in the next three to four months.
“There is some lack of clarity on ownership of such exchanges and whether the existing foreign exchange ownership will be considered when looking at either the 51 per cent or 49 per cent cap. Some clarity will also be required on currency convertibility,” said another exchange official.
