Smaller exchanges will find it difficult to fulfill Securities and Exchange Board of India’s (Sebi) new minimum networth criteria of Rs 100 crore, according to Federation of Indian Stock Exchanges (FISE), which represents 15 regional stock exchanges (RSEs).
Among the new set of norms unveiled by market regulator on Monday for market infrastructure institutions (MIIs), it said stock exchanges would be given three years' time to achieve minimum networth of Rs 100 crore.
“Some of policy initiatives brought out by Sebi, like fulfilling of minimum networth of Rs 100 crore within a period of three years would lead RSEs involuntarily to their compulsory closure or de-recognition,” said BK Sabharwal, chairman of FISE, in a statement. “This will harm the interests of their trading members, small and medium enterprises which had listed their stocks with them, their stake holders and also the small investors all over the country,” he added.
| HIGH NETWORTH TROUBLES |
| Regional stock exchanges says Rs 100 cr networth criteria too stiff |
| New networth criteria may lead to compulsory closure or de-recognition of many RSEs, industry body says |
| Sebi's new policy may push some RSEs to look for mergers, exit route |
| New policy initiative lets down investors of RSEs who paid a premium to buy stake |
Sebi’ new policy might push some of the RSEs to look for possible mergers amongst themselves or to
seek exit route, Sabharwal said.
There are 15 Sebi-recognised RSEs in India, including the Ahmedabad Stock Exchange, Bangalore Stock Exchange, Calcutta Stock Exchange (CSE) and Delhi Stock Exchange. There is hardly any trading happens on most of these RSEs.
According to a FISE statement, RSEs had gone for demutualization during 2007-08 and had invited public participation. “Many new investors moved in as the exchanges had indicated revival chances then. Most of these investors paid a premium to acquire equity stake in the regional stock exchanges and today, they feel let down with the new policy initiative,” FISE said.
The corporatisation and demutualisation of stock exchanges, mandated by market regulator Sebi in 2004, required that at least 51% of shares be held by non-trading members of the exchange.
Sebi’s move to disallow trading members on the boards of stock exchanges has also not gone down well with smaller stock exchanges. According to them, the present governing structure wherein they have only 25% representation could have been continued. “As the trading members remain the potential drivers of the capital market and their absence on the boards of the exchanges may affect the business policies of the stock exchanges in future,” FISE said.
The regulator has said that boards of stock exchanges shall constitute an advisory committee comprising trading members to take benefit of their experience. All recommendations of the this advisory committee will have to be placed in the ensuing board meeting for consideration and appropriate decision, according to Sebi.
