Mumbai: The government on Monday extended U.K. Sinha’s tenure as the chairman of the Securities and Exchange Board of India (Sebi) for a year, opting for continuity at a time of domestic and global market volatility.

The appointments committee of the cabinet approved extension for Sinha from 18 February 2016 to 1 March 2017 “or until further orders, whichever is earlier," the government said in a statement.

Sinha, a 1976 batch Indian Administrative Service (IAS) officer of the Bihar cadre, assumed office as chairman of the capital market regulator on 18 February 2011. Initially appointed for a three-year term, he was later given a two-year extension.

Former Forwad Markets Commission (FMC) chairman Ramesh Abhishek, State Bank of India chairman Arundhati Bhattacharya and Thomas Mathew, additional secretary in Rashtrapati Bhavan, were the three closest contenders for the post of Sebi chairman this time.

While Abhishek and Mathew had been shortlisted by a selection panel, Bhattacharya, who had not applied for the job, was invited for the interview.

After the government designated Abhishek as the new secretary of the department of industrial policy and promotion (DIPP) last week, it signalled that he was no longer in the running for the post.

Bhattacharya ruled herself out as a candidate last week at a press conference.

Sebi’s whole-time member Rajeev Kumar Agarwal, former disinvestment secretary Aradhana Johri and former Reserve Bank of India deputy governor Subir Gokarn were some of the others in the running to become the next Sebi chairman.

With the extension, Sinha has become the second longest serving Sebi chief after D.R. Mehta, who was at the helm for seven years ending in 2002. Mehta was granted a two-year extension in 2000 for the second time.

Sinha’s tenure at Sebi has seen significant regulatory changes. Almost every regulation has gone under the knife, including insider-trading and delisting rules, listing norms, the takeover code, and mutual fund regulations.

Also during Sinha’s tenure, Sebi has been given additional powers, including the ability to conduct search and seizure operations and calling for call data records to crack down on money pooling schemes.

In September 2015, Sebi was merged with the FMC, bringing the commodity markets under its ambit.

“It is a wise decision taken by the government to maintain continuity at a time when the market is under turmoil due to the global factors. The only downside is that the announcement should have been made long time back to avoid unnecessary speculation," said J.N. Gupta, co-founder and managing director at proxy advisory firm SeS Governance.

The benchmark BSE Sensex has fallen by 9.8% since the start of January due to global turbulence. On 27 January, Mint reported that (Sebi) was examining whether the rules and trading norms in place are sufficient to mitigate risks from possible market manipulation or disproportionate unwinding of derivatives positions.

Sinha has a fair number of challenges to tackle over the next year.

In the secondary market, with the increasing number of trades through high frequency trading (HFT), a debate over creating a level-playing field for small and large, sophisticated investors is heating up.

Although a relaxation in co-location facility rules has helped, Sebi is still trying to find a way to ensure that one set of investors does not get discriminated when another set of investors trades through HFT.

The matter has been taken up for discussion several times with other market regulators in developed nations, but a solution is yet to be worked out.

Co-location refers to bourses allowing members to set up automated trading systems on their premises to reduce the time required for orders to flow between the exchange and the broker’s trading system.

Sebi is also currently in the process of streamlining regulations for the commodity and equity markets, both of which are under its ambit now.

The merger of Sebi and the FMC had sparked hope that the commodity markets would open up, and new participants such as foreign portfolio investors, banks and other financial institutions would be allowed in the market. That hope has been belied.

Meanwhile, Sebi has allowed listing of stock exchanges, but the main test of regulations will be when the bourses actually launch their initial public offerings (IPOs).

A number of norms under Stock Exchanges and Clearing Corporations (SECC) on shareholding pattern, avoidance of anti-competitive practices due to cross-listing, eligibility criteria for shareholders and issues on conflict of interest will pose multiple challenges for Sebi.

“Mr Sinha has taken Sebi and the regulatory framework of the securities market in the right direction. Considering the turmoil that the market are undergoing currently, he is best suited to steer the markets at this juncture..," said Ashish Chauhan, the managing director and chief executive of BSE Ltd.

In the past five years, Sebi has allowed real estate investment trusts (REITs), infrastructure investment trusts (InvITs), start-ups listing platform and municipal bonds, among others.

These instruments and fund raising avenues were hailed by the industry. Yet, not a single REIT or InvIT has hit the market.

While listings of small and medium enterprises took off well, the same success has not been repeated on the start-up platform—at least, so far. The task for Sinha in the next year will be to push these initiatives.

In the mutual fund sector, an issue that has once again gained prominence is the commission charged by funds, after a finance ministry-appointed committee headed by Sumit Bose asked for the lowering of commissions charged across financial products. Sinha will now be faced with the difficult task of implementing the recommendations of the committee and increasing mutual fund penetration.

Leo Puri, managing director of UTI Asset Management Co. Pvt. Ltd., said: “This (Sinha’s extension) is a welcome move at this point in time as it represents continuation of pro-market policies and reforms, which have been focused on striking the right balance between development and supervision of the markets, which is much needed. Hopefully, this will herald an acceleration towards reforms in the broader capital markets."

“The two key priorities before Sebi would be firstly to continue to have welcoming policies towards global investors, and secondly, to keep a steady focus on the critical task of increasing retail and household participation in the capital market and have strong intermediation," said Puri.

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