Sebi formal norms on SEs' changeover soon

The Securities and Exchange Board of India (Sebi) is coming out with disinvestment guidelines for the newly corporatised and demutualised stock exchanges (SEs).

The guidelines will prioritise the options available for bringing down brokers' stake to the mandatory 49 per cent in the corporatised bourses.

The disinvestment regulation, framed under the Securities Contract Regulation Act ( SCRA), proposes to make it mandatory for the SEs to opt for an initial public offering (IPO) of fresh shares as the first option for disinvestment.

These fresh shares, constituting at least 51 per cent of the post-issue paid-up capital, have to be allotted to the public (not brokers). This option would enable exchanges to dilute borkers' stake to the mandated level without altering their holding in the corporatised entity.

If the first option did not seem feasible to the board, the exchange concerned can consider the second option of priority - strategic sale - only after discussing the issue with the regulator.

Under the second option also, the public shareholding, including that of the strategic partner, should constitute at least 51 per cent of the total share capital after induction.

The stock exchanges could consider the third and final option of offer for sale, if their board feels that the second option is also not feasible.

The market regulator is in the process of finalising the corporatisation plan of 19 more stock exchanges.

Under the new scheme, those stock exchanges that are limited by guarantees will have to re-register with Registrar of Companies (RoC) to convert the guarantees into shares.

Some of the bourses that may have to re-register include Saurashtra Kutch, Magadh, Bhubaneswar and Guwahati. Moreover, unlike Bombay Stock Exchange, these exchanges will get more time to decide and opt for setting up of clearing corporation for their respective exchanges.

Explaining this, sources said regional stock exchanges do not have large trading volumes such as BSE to warrant setting up separate clearing corporation.

Currently, out of the 22 SEs in the country, 19 are not for profit companies, limited either by guarantees or by shares. While the National Stock Exchange and the Over the Counter Exchange of India (OTCEI) have been demutualised, where ownership, management and trading rights are in the hands of different sets of people right since inception.

The regulator approved the corporatisation and demutualisation plan submitted by the Bombay Stock Exchange in May 2005. It became a corporate entity on August 19.