Mumbai: Even as it prepares to list on its rival BSE, the National Stock Exchange of India Ltd (NSE) has recommended three options to the Securities and Exchange Board of India (Sebi) to safeguard its interests, two people with direct knowledge of the matter said.
Sebi norms do not permit an exchange to list on itself or associated exchanges, prompting BSE and NSE, both of whom are selling shares, to list on each other.
NSE’s first suggestion is only a panel of public interest directors at the regulator-exchange should look into the disclosures made by the regulatee-exchange after listing, said one of the two people cited earlier.
Simply put, after NSE lists on BSE, only public interest directors on BSE’s board—these are non-executive independent directors— should look at its disclosure and vice-versa. This is aimed at protecting trade secrets.
The second option put forward by NSE is that all the listing related disclosures be made to Sebi rather than to the regulator-exchange.
Third, NSE has asked Sebi that its shares be allowed to trade as “permitted securities” on NSE itself.
This mechanism allows trading in securities of companies that are listed in other exchanges. This option has been asked for because NSE wants better liquidity and price discovery, said the first person cited above.
“The conflict of interest, whether we act as regulator for an exchange or become the regulated entity, is a concern. We are in dialogue with the regulator to address the issues. This process is going on parallel to our steps towards meeting our listing timelines,” said a senior NSE official, the second of the two people, on the condition of anonymity.
Without going into details, an NSE spokesperson said that a sub-committee of the exchange’s board was evaluating the options.
An email sent to a Sebi spokesperson on Thursday remained unanswered.
“It is going to be tough regulatory call without an amendment to the Sebi regulations first,” said Vaneesa Agrawal, partner, Suvan Law Advisors. “Sebi’s position seems to be that the way regulations stands today, they do not provide for self-listing of a stock exchange, be it directly or in any hybrid form indirectly. Regulator will have to weigh commercial and regulatory role of a stock exchange for setting such precedence.”
Earlier this year, NSE and its investors had a standoff, where the latter was pushing the exchange for an early listing and NSE had expressed concerns on cross listing.
The stand-off ended when NSE on 27 June announced that the exchange would file documents in January for an IPO that would give an exit opportunity to its institutional investors.
NSE counts SBI as its major shareholder with 5.19% stake.
Other big shareholders include Life Insurance Corporation of India (10.51%), Goldman Sachs (5%), Tiger Global Management (3%) and Citigroup Strategic Holdings Mauritius (2%).
On 23 August, NSE announced that it has hired four investment bankers and a legal adviser for its proposed share sale, which will be a pure offer for sale (OFS).
The NSE board has hired Citigroup Global Markets India Pvt. Ltd, JM Financial Institutional Securities Ltd, Kotak Mahindra Capital Co. Ltd and Morgan Stanley India Co. Pvt. Ltd as joint global coordinators. It has named Cyril Amarchand Mangaldas as its legal adviser.
NSE shareholders are hopeful of a listing by March next year.
Mint reported on 20 September that the proposed share sale would value NSE at Rs45,000 crore and that the exchange is planning to offer at least 20% stake.
NSE’s rival BSE which has come out with a draft prospectus for a share sale has said earlier it has no concerns on cross-listing.