Sebi's SMILE to comb market infrastructure

Fallout of IPO snafus: Nayak to head task force.

The Securities and Exchange Board of India (Sebi) has constituted a high-level task force, headed by P J Nayak, UTI Bank chairman and managing director, for a comprehensive "health check" of the infrastructure in the securities market.

Called the Securities Markets Infrastructure Leveraging Expert Task Force (SMILE), the task force will have to look at the entire spectrum of entities and players in the market""the equity, debt, and derivatives markets, fund products and market participants such as exchanges, trading platforms, clearing and settlement systems, payment systems, depositories, issue houses (registrars), merchant bankers, investment bankers and other intermediaries.

The task force has a mandate to comb through all segments of the securities market and to identify any lacunae in the system and prescribe remedies.

Its other members are N L Sarda, professor at the Indian Institute of Technology, Mumbai, C B Bhave, NSDL managing director, Nachiket Mor, ICICI Bank executive director, Ravi Narain, National Stock Exchange (NSE) managing director and CEO, Manoj Vaish, Bombay Stock Exchange executive director and CEO, Sanjay Nayar, Citibank CEO, M R Ramesh, Clearing Corporation of India managing director, Cyril S Shroff from Amarchand Mangaldas, Indrajit Gupta, SBI Capital Markets managing director, M Vidyasagar, TCS executive vice-president, Alok Vajpeyi, DSP Merril Lynch Fund president. Sebi Executive Director Pratip Kar will be the member-secretary of the task force.

The task force will review the infrastructure in the market, diagnose the deficiencies and inadequacies and recommend "cutting-edge solutions to upgrade infrastructure, standards of processes and skills, considering the potentially high growth rates for the Indian economy in general and the anticipated high rise in the volumes in securities markets transactions, multiplicity of products and growing number of participants from within India and from outside."

Sources in the know of the development said Sebi had taken the decision to appoint a task force after extensive consultations with market intermediaries over the past few days. "The failure of the system was shown up in the recent public offerings with various market intermediaries unable to handle the huge volume of activity," they said.

Further, the regulator also feels the need to upgrade the current infrastructure of the stock exchanges. Mutual funds, which were considered fairly clean vehicles of investments, have also been found to be indulging in unethical practices and violating regulations.

SMILE will also recommend the best practices for setting up, maintaining and upgrading the securities market infrastructure (both hardware and software), including business continuity plans.

The task force will study whether skills and infrastructure need to be scaled up and will recommend solutions so that stock market participants can diversify into products like commodities and foreign exchange, among others.

Meanwhile, straight through processing is expected to be implemented in the securities market from July 1 this year.

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The doctor is coming

• Smile to do a comprehensive 'health check' on the capital market's infrastructure.
• Smile's mandate is to identify any lacunae in the system and prescribe remedies.
• Sebi's action prompted by doubts whether the present system can handle higher market volumes, the multiplicity of products and the growing number of participants.

P J Nayak, CMD, UTI Bank