The Securities and Exchange Board of India (Sebi) is still insisting on legislative changes to be made to the Securities Contracts Regulation Act (SCRA) as a necessary pre-requisite to the corporatisation of exchanges, even though the finance ministry has already told the markets regulator that no such changes are required.
Sebi executive director Dharmishtha Raval told Business Standard: "Of course, it is upto the government to take the final decision and if they feel that no amendments are needed, then we cannot do anything about it, but our decided and legal view is that changes are needed."
Sebi will be thrashing out the nitty-gritties of corporatisiation with the Central government officials in the coming weeks and this is expected to take time. "How can corporatisation be done without effecting the necessary changes," Sebi chairman D R Mehta, said.
At present, all the exchanges are companies (registered under Section 25 of the Companies Act), with the exception of Ahmedabad Stock Exchange, Pune Stock Exchange and the Bombay Stock Exchange. However, with the exception of the National Stock Exchange and Delhi Stock Exchange, other exchanges have various structures - some limited by guarantee, some profit-making and some non-profit making companies - and not limited by equity capital liability as in a proper company. Other changes required are amendment in the stamp Act, Income Tax - transfer of shares to the brokers will involve capital gains and therefore subject to tax and so on. These are the amendments of a fiscal nature.
In the aftermath of the turmoil on the bourses in March this year, Yashwant Sinha had announced in Parliament that stock exchanges would be corporatised with a distinction made between the ownership and the management of the exchanges. While Sebi went along with the idea, it drew the finance ministry's attention to the fact that the current SCRA does not provide for a specific management structure in a corporatised ambience which there is no mention in the Act of a clear ownership structure. Sebi wants a uniform management and ownership structure to be followed by all stock exchanges and it is with reference to this that the amendments are being sought.
However, the law ministry, to which the finance ministry referred the matter, has taken the view that a simple change in the rules of SCRA would suffice with no amendments made to the Act itself. The ministry has also argued that the NSE and DSE have been corporatised within the existing regulations. In fact, the government is learning to be looking at the NSE structure as a suitable model for demutualising the stock exchanges.
