Sebi plans separate regulator for SEs

Capital market regulator — Sebi plans to set up an independent SRO (self regulatory organisation) for stock exchanges, but wants the day-to-day trading regulations and surveillance actions to remain with bourses themselves.

Under the existing regulatory framework in India, stock exchanges act as front-line regulators for the market and Sebi (Securities & Exchange Board of India) is the ultimate oversight and regulatory authority.

After putting in some efforts to effect a major overhaul last month in the way stock exchanges are run and owned, Sebi is now looking at ways to minimise any possible conflict of interest in the regulatory and business interests of bourses.

As per the new rules, exchanges can also get listed, although not on their own platform. Sources said Sebi is of the view that an independent SRO could be set up to take over member regulation functions of stock exchanges in the long run, but trading regulations and surveillance actions should remain with bourses.

Reporting structure

However, a dual reporting structure could be introduced for the regulatory department of stock exchanges for now to tackle any conflict of interest. Under dual reporting, the head of regulatory department would report to the managing director or Chief Executive Officer of the bourse as well as to an independent committee of the exchange’s board.

The Sebi board has already approved a proposal for providing the seed fund for setting up the SRO, whenever deemed appropriate.

For trading regulations and surveillance actions also, the Sebi is in favour of dual reporting for the heads of these departments — to the chief executive officer or managing director as well as to an independent committee of the board of the bourse.