Mumbai: The board of capital markets regulator Securities and Exchange Board of India (Sebi) will hold its last full-time meeting of the financial year on Wednesday. While the regulator will clear its accounts and policy initiatives for 2017-18, it will also address and clear five key market issues.

Amendments to Sebi listing norms for insolvent companies

The Insolvency and Bankruptcy Code (IBC) is clearly a priority for markets with Rs10 trillion of stressed assets clogging the banking system and many of them heading for resolution under the bankruptcy code. Most of these so-called insolvent companies are listed.

To remove the conflicting issues or to ease the onerous Sebi norms for these stressed companies, the regulator will issue a discussion paper to ease public float requirements and delisting norms. The price will be determined by the National Company Law Tribunal or NCLT and Sebi will do away with reverse book building. Most importantly, Sebi will open up a public debate on whether trading in stocks of companies such as Essar Steel and Bhushan Steel, which are under insolvency, should be stopped or be continued.

Fairer norms for algorithmic trading

Algorithmic trading, which allows a person to execute thousands of orders on stock exchanges in less than a second, has gained prominence as its market share in the equity derivatives segment, the percentage of high-frequency trade orders, has gone up from 78% to 98% between fiscal year 2012 and fiscal 2017. The share of turnover has risen from 22% to 56%.

To make algo trading more equitable, the regulator will propose norms to make trading cheaper by asking for sharing of co-location services. Currently, one rack (space which allows members to place their servers at exchange premises) or half a rack was taken by a member which used to cost up to Rs40 lakh annually. With sharing, one rack can be taken up by as many as six members. Some data feed services will also be provided for free. These measures will bring down costs by 90%. Specific identifiers will be placed on each algo as against the current norm which only separates algo from non-algo.

Rules for fiduciaries

While Sebi has done a clean-up act against brokers and other market intermediaries, norms to regulate chartered accountants and valuation firms have been few and far between. This was largely due to jurisdiction issues, as Sebi did not have the powers to act against them. Sebi will now have powers to disgorge ill-gotten gains and bar such fiduciaries from the securities market in case of lapses.

Making mutual funds cheaper

The regulator will revise the expenses charged to mutual fund companies by 10 basis points. A basis point is one-hundredth of a percentage point. This is based on its internal study that mutual fund schemes have levied some charges to the investors unethically to the tune of Rs1,500 crore. In 2012, Sebi had allowed mutual funds to charge 20 basis points of assets under management of the scheme in lieu of exit loads, or the sum collected from investors when they sell holdings. The regulator told the fund houses to add back exit loads to the schemes to prevent loss to other investors.

Also Read: Mutual fund investors charged Rs1,500 crore unfairly: Sebi study

Rules for angel funds

It will increase the maximum investment by angel funds in venture capital undertakings to Rs10 crore from the current Rs5 crore in a bid to give an impetus to startup funding. The minimum corpus size required for an angel fund to register with Sebi is also set to change to Rs5 crore. The regulator may also raise the maximum period of accepting funds from an angel investor to five years from the present limit of three years.

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