Sebi for single SME exchange

Amid the hullabaloo on the participatory notes (P-notes) issue, the Securities and Exchange Board of India (Sebi) also took other significant steps.

The initiatives include a decision to have only one stock exchange for small and medium enterprises (SMEs), measures to increase the surveillance on exchanges and speeding up the launch of more products in the derivatives segment.

Announcing the decision after the board meeting, Sebi Chairman M Damodaran said the regulator would lay out the broad policy framework for the setting up of an SME exchange soon.

Proposals would be invited from applicants for setting up the SME exchange, he said.Stressing that there would only be a single exchange for SMEs, Damodaran said more changes would be considered only "if there is a market case for more than one exchange (for SMEs)".

In recent months, the National Stock Exchange (NSE), the Bombay Stock Exchange (BSE), Inter-connected Stock Exchange (ICE), the Over-the-Counter Exchange of India (OTCEI), among others, have evinced interest in setting up an exchange (or a separate trading platform) for SMEs.

Outlining steps to beef up the market surveillance, Damodaran said stock exchanges had been mandated to constitute a committee, which would be chaired by a non-executive member (on the board of respective exchanges).

This specially constituted committee will monitor the surveillance mechanism on the stock exchanges. To allow more products for onshore investors, the Sebi chief said the Ram Mohan Rao Committee, which was set up for the introduction of more derivative products in India, had been asked to submit its report as early as possible.

Rao, the dean of Indian Institute of Science, Hyderabad, is heading the committee to study and recommend the launch of new derivative products in India. The committee was set up early this year.

The Sebi board also found that its recent decision on consent orders was not only a good initiative, but would also in "clearing up the backlogs".

Following the initiatives taken by the Sebi, the corporate bond market is also attracting a significant amount of volumes.

An active corporate bond market is important to attract long-term funds, which could be channelled to meet the huge infrastructure funding requirement.

Total trading volumes in the corporate bond markets were nearly Rs 60,000 crore during this calendar year, the Sebi website said.