Sebi working on exit policy for stock exchanges

Investor protection fund under one agency

“Sebi is exploring the option of moving the Investor Protection Fund (IPF) of exchanges to a single agency, which can provide a strong governance mechanism and deliver prompt investor protection,” the capital market regulator said in a status report filed with its board late last month.

Sebi told the board, at its meeting on November 24, that the matter was under consideration. The regulator further said that it is “is currently in the process of reviewing the exit policy of stock exchanges.”

“The primary issues to be addressed on the exit of stock exchanges are about dealing with exclusively listed companies and also the manner of dealing with assets of the stock exchanges.

“This would also need inputs from other stakeholders. Once the process of consultation is complete, the exit policy for exchanges will be put in place. Further a presentation is also proposed to be made to the Board in this meeting itself.”

Regarding the stock exchange platform for SMEs (Small and Medium Enterprise), Sebi said that the required framework has been put in place and final approvals have also been granted to BSE and NSE to operationalize the SME platform.

“Impact of any change, if any, on the securities market will require to be assessed, before a final view can be taken,” Sebi said. About the stock borrowing and lending framework, Sebi said that any changes to the present framework on collaterals applicable to FIIs might require changes to the provisions of FEMA.

On the issue of inter-operability of clearing corporations, Sebi said that it was a complex matter and any decision would depend on the final ownership and governance norms for Market Infrastructure Institutions, on which deliberations have been continuing for many months now.

Sebi also said that the securities markets were at a disadvantage when compared to the commodities segment on account of STT (Securities Transaction Tax), as commodities market is not subjected to any similar tax.

“DOR (Department of Revenue) was urged to reduce the stamp duty on delivery-based transactions in the cash segment,” Sebi said, while adding that a similar move to reduce the STT rates for the delivery-based transaction in the cash segment would make such transactions more attractive and eliminate the inequity inherent in the present structure.

On the algorithmic trading issue, Sebi said there were no specific guidelines on this matter. “A Technical Advisory Committee has been set up to establish a suitable regulatory framework for algorithmic trading (inclusive of High Frequency Trading),” Sebi said.

New KYC norms
Sebi is also working on simplifying the Know Your Client process for easy investing, on Saturday, said there will be no burden on investors for maintaining their data with the KYC Registration Agency (KRA).

In case of demat, an investor has to pay a certain annual maintenance and usage charges for their account with the two depositories. In case of single KYC data, KYC Registration Agency will do the record keeping. Nagpal said the KRA regulations had been notified and Sebi was working closely with stock exchanges and intermediaries for the rollout of the new simplified norm.

Under the new process, once the investor has undergone the KYC process, an intermediary shall perform the initial KYC of its clients and upload the details on the system of the KRA. If the investor intends to open account with another intermediary, the intermediary concerned can verify and download the client’s details from the system of the KRA.