Capital markets regulator Securities and Exchange Board of India (SEBI) has notified norms pertaining to ownership and governance of bourses, to facilitate setting up and listing of stock exchanges.
"Based on the board decisions, the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012, (SECC) have been notified on June 20, 2012 to regulate recognition, ownership and governance in stock exchanges and clearing corporations," SEBI said in a release.
As per the norms, a new stock exchange is required to have a net worth of Rs 100 crore and 51 per cent of equity should be held by public shareholders. Foreign Direct Investment has been pegged at 26 per cent and Foreign Institutional Investment at 23 per cent. Individual investors cannot own more than 5 per cent. However, if the single investor happens to be a stock exchange, a depository, bank, insurance company or a public financial institution, then the shareholding can be up to 15 per cent.
This limit will take into consideration the exposure of stock exchanges irrespective of the fact whether they are direct or indirect. In case a shareholder holds more than the SEBI prescribed limit, a three-year timeframe will be provided to bring it down to the approved limit.
Further, the new rules have permitted listing of a stock exchange on any recognised stock exchange barring itself, subject to certain criteria. The new norms come in the wake of a Supreme Court directive to SEBI in April following a legal tussle between the regulator and Multi Commodity Exchange (MCX), India’s largest commodities exchange, which had sought an approval to set up a platform for equity trading.
The apex court has asked SEBI to reconsider its norms catering to the Manner of Increasing and Maintaining Public Shareholding (MIMPS) in recognised stock exchanges, under MIMPS Regulations, 2006 and to reconsider MCX’s application.
The regulator is also finalising norms for addressing conflict of interest issues for market infrastructure institutions. In a statement, SEBI said the since depositories are part of market infrastructure institutions, requisite amendments to Securities and Exchange Board of India (Depositories and Participants) Regulations, 1996 (D&P) are also being made, pertaining to their ownership and governance.
The regulator will lay down minimum listing standards for companies. In addition, a Conflicts Resolution Committee (CRC) will be formed with the idea of involving mainly external and independent members for addressing issues on conflicts of interest covering policy and guidelines.
On Clearing Corporations, SEBI said an expert committee will be formed to look into issues such as the feasibility of a sole clearing agency, issuing norms for using profits and investments by clearing corporations and to oversee Trade Guarantee Fund and Settlement Guarantee Fund’s financial pool. A clearing corporation is required to have a minimum net worth of Rs 300 crore, within three years from the issue of recognition. Unless, the specified net worth amount is achieved, profits will not be distributed to shareholders.
On the governance front, the stock exchanges are to transfer 25 per cent of its profits every year to the fund of a clearing corporation, formation of an oversight committee by the stock exchange, setting up of an advisory committee and appointment of a compliance officer both by the stock exchange and clearing corporation and constitution of a risk management committee by the clearing corporation.
(Edited by Prem Udayabhanu)