A Securities and Exchange Board of India-appointed panel has sought views from market participants on presence of trading members on boards of exchanges.
The committee, headed by former Reserve Bank of India governor Bimal Jalan and reviewing the regulatory architecture of stock exchanges, has also sought comments on issues related to listing of stock exchanges, cross-listing and restrictions on owning clearing corporations.
In a public notice, the committee has asked stock exchanges, depositories and clearing companies to respond to these concerns.
The committee was formed to consider issues with regard to the emerging market micro-structure and the evolving role of market infrastructure institutions (stock exchanges, depositories, clearing corporations). It will also review the ownership and governance structure of such institutions to ensure they remain relevant and effective. Market participants have been asked to respond by May 10.
On ownership and governance, the committee has asked the market participants if diversified ownership (as in the case of stock exchanges) or an anchor/strategic investor approach (as in the case of depositories) is a better model.
The committee has also sought views on classes of entities that can be permitted to be anchor investors. The questionnaire asks it there should be lock-in restrictions for such investors.
On listing, the committee wants to know if separate requirements need to be put in place for QIBs (qualified institutional buyers) participating in primary issues of stock exchanges and also whether they should be granted positions on boards of exchanges.
It is also looking at whether the current limit for foreign institutional investors in stock exchanges needs to be reviewed. Market participants have been asked to also give views on whether foreign stock exchanges should be permitted to hold up to 15 per cent or more equity in Indian stock exchanges.
The issues of cross-listing and dual listing (including listing of shares of the stock exchange on itself) would also be examined.
This assumes significance as there have been various reports suggesting that some of the present shareholders of stock exchanges are anxiously waiting for bourses to list. This is because this will help raise valuations. The committee has also touched upon the issue of trading members on boards of exchanges. It has asked whether they should have any representation on the board, as they can “potentially have access to confidential information in respect of trading information pertaining to other members as well as sensitive information”.
It wants to know if trading members can be put on a separate advisory board. Sebi has also asked if safeguards similar to insider trading rules should be prescribed for trading members on boards of exchanges. Incidentally, the Bombay Stock Exchange has three trading member directors on its board. On ownership of depositories, the committee wants to know if it is desirable to allow exchanges (who are in a related business) to own more than 50 per cent in depositories. The National Stock Exchange recently increased its stake in National Securities Depository Ltd to 36 per cent. BSE is also trying to increase its stake in Central Depository Services Ltd.
| QUESTIONS RAISED BY SEBI PANEL # Should foreign stock exchanges be permitted to hold up to 15% or more equity shares in Indian stock exchanges? # What are the issues arising out of the listing of shares of a stock exchange on itself? # Should dual listing of shares be considered? # Should there be any trading member on boards of exchanges, or alternatively, can they be put on a separate advisory board? # Should safeguards similar to insider trading rules be prescribed for trading members on boards of exchanges? # Should clearing corporations be subsidiaries of exchanges or separate entities? # What should be the ownership restrictions for clearing corporations? # Is it desirable to allow exchanges to own more than 50% of depositories? # Whether the current limit for FII in stock exchanges needs a review? # Whether cross-listing is desirable? # Which is a better model: * Diversified ownership * anchor/strategic investor approach? |
