Sebi begins finalising bourses' ownership, governance rules

In addition to the comments received by Sebi from various stakeholders such as exchanges, market participants and investors, the regulator would also take into account views expressed by eminent personalities in media and on public forums, a senior official said.

A synopsis of the feedback on the recommendations is likely to be placed before the Sebi board in its next meeting, but a final decision is not likely soon because of varied reaction generated by the proposals, he added.

The government's view on the matter will also be taken into account through its nominees on the board, he said.

Sebi had put forth the recommendations made by the Bimal Jalan Committee for review of ownership and governance norms for market infrastructure institutions on November 23, 2010 and had invited public comments on the same till December 31.

The committee suggested sweeping changes in the way stock exchanges are owned and function and its proposals include capping their profitability and not allowing them to get listed to safeguard their front-line regulatory role.

The proposals generated intense debate in media and on public forums, while at least three surveys were also conducted by different organisations on its various proposals.
These surveys are on top of one conducted by the Jalan committee itself, wherein it had put forth a questionnaire for public comments to decide on its recommendations.

These surveys, conducted by research firm IMRB, economic think-tank and financial data provider CMIE and stock market website EquityMaster.Com were apparently aimed to gauge the opinion of stakeholders and investors on the issue.

Out of these, IMRB survey was commissioned by MCX Stock Exchange, a stakeholder in the issue and among those to be affected maximum by the recommendations. The bourse, which is currently allowed to trade in currency futures only, has opposed vehemently the committee's various proposals.

The IMRB and the Jalan committee surveys were based on responses from stakeholders in the exchange space.

However, IMRB claimed to have approached a total of 101 respondents for the survey, as against 29 respondents in the Jalan committee survey.

The results of IMRB survey apparently indicated a stiff opposition to the committee proposals.

The CMIE survey claimed to have posed five questions about the issue to as many as 5,392 people, including retail investors.

The Jalan committee recommendations, incidentally, are limited to market infrastructure institutions -- stock exchanges, depositories and clearing corporations, and not aimed at retail investors.

The EquityMaster.com survey also sought to gauge the opinion of retail investors on the issue.

The proposals have faced severe criticism from various quarters, including industry chambers and market participants, including the country's oldest bourse BSE and MCX-SX.

The various options now likely to be considered by Sebi include making listing optional for bourses and separating their regulatory and business roles.

The regulator may also consider whether bourses can be asked to put in place 'Chinese Walls' between their regulatory and corporate functions.

The move is aimed at keeping the front-line regulatory role of the bourses unaffected by their profit-making and other business interests after they become publicly held companies following their listing.