Clearing the decks for listing of stock exchanges, capital market regulator the Securities and Exchange Board of India (Sebi) today said 51% stake of bourses could be held with public.
This was decided after considering the much-debated Bimal Jalan Committee recommendations which had not favoured listing of stock exchanges.
However, the board in its meeting here accepted several other recommendations of Jalan Committee on 'Review of Ownership and Governance of Market Infrastructure Institutions (MIIs)'.
"The stock exchanges will have diversified ownership and no single investor will be allowed to hold more than 5% except the stock exchange, depository, insurance company, banking company or public financial institution which may hold up to 15%," the Sebi said.
"Fifty-one per cent of the holding of the Stock Exchanges will be held by public," the market regulator said.
The stock exchanges may be permitted to list when they put in place the appropriate mechanisms for tackling conflicts of interest, it said, adding, the stock exchanges will not be allowed to list on itself.
No stock exchange shall be permitted to list within 3 years from the date of approval by Sebi, it added.
Prescribing conditions for listing, Sebi said, stock exchanges should have minimum networth of Rs 100 crore and the existing stock exchanges will be given 3 years to achieve the threshold capital base.
In case of listing of other Market Infrastructure Institutions (MIIs) like Clearing Corporation (CC), the Sebi said the minimum networth for CC and the depository will be Rs 300 crore and Rs 100 crore, respectively.
"All existing clearing corporations shall be mandated to build up to the prescribed networth of Rs 300 crore over a period of 3 years from the date of notification or circular," it said.
In case of CCs, at least 51% holding will be held by stock exchanges, it said.
An exchange holding 51% in a CC cannot hold more than 15% in any other CC, it said, adding, to ensure diversified ownership for shareholders other than stock exchanges, the limit of 5% (stock exchanges) and 15% (FIs like insurance and Banks) shall apply as in the case of stock exchanges.
Any exchange currently holding more than 51% stake in CC shall be given 3 years time to bring its holding to the prescribed limit, it said.
The capital market regulator has also prescribed the criteria for de-recognition of any bourses not in operation.
A stock exchange without any trading on its platform or where the annual trading is less than Rs 1,000 crore may apply for voluntary de-recognition and exit, it said.
"If the stock exchange eligible for voluntary de-recognition is not able to achieve a turnover of Rs 1,000 crore on continuous basis or does not apply for voluntary de-recognition and exit within a period of 2 years from the date of notification, Sebi shall proceed with the compulsory de-recognition and exit of such stock exchange," it said.
With a view to extending the perimeter of regulation to unregulated funds and ensuring systemic stability, increasing market efficiency, encouraging formation of new capital and providing investor, the market regulator approved the proposal to frame Sebi (Alternative Investment Funds) Regulations, 2012.
As per the proposed regulation, Alternative Investment Funds (AIFs), operating as private equity funds, real estate funds, hedge funds etc, must register with Sebi under the AIF Regulations.
Sebi (Venture Capital Funds) Regulations, 1996 (“VCF Regulations”) shall be repealed, it said.
However, Sebi said, existing VCFs shall continue to be regulated by the VCF Regulations till the existing fund or scheme managed by the fund is wound up.
Existing VCFs, however, shall not raise any fresh funds after notification of these Regulations except commitments already made by investors as on date of the notification, it said.
Such VCFs may also seek re-registration under AIF regulations subject to approval of 66.67% of their investors by value, it added.
Sebi further said existing funds not registered under the VCF Regulations will not be allowed to float any new scheme without registration under AIF Regulations.
However, schemes floated by such funds before coming into force of AIF Regulations, shall be allowed to continue to be governed till maturity by the contractual terms, except that no rollover or extension or raising of any fresh funds shall be allowed, it said.
Existing funds not registered under the VCF Regulations which seek registration but are not able to comply with all provisions of AIF Regulations may seek exemption from the Sebi from strict compliance with the AIF Regulations.
The proposed regulation seeks to cover all types of funds broadly under 3 categories.
Category I AIF would be those funds with positive spillover effects on the economy, for which certain incentives or concessions might be considered by Sebi or Government of India or other regulators in India; and which shall include venture capital funds, SME funds, social venture funds and infrastructure funds, it said.
Category II AIF would not enjoy any incentives or concessions given by the government or any other regulator, it said, adding these would include private equity funds, debt funds, fund of funds etc..
Third category of the AIFs including hedge funds that are considered to have negative externalities such as exacerbating systemic risk through leverage or complex trading strategies.
These funds can be open ended or close ended, may engage in leverage subject to limits as may be specified by the Sebi.
Earlier, Sebi had floated a concept paper along with the draft Alternative Investment Funds Regulations on Sebi website on August 1, 2011.
The public interest directors representation on board of stock exchanges will be 50%, and will be two-third of the board strength
The appointment of all directors to the board of exchanges will be subject to approval by Sebi.
Stock exchanges will be mandated to transfer 25% of their profits to the Settlement Guarantee Fund (SGF) of the clearing corporation.
