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BSE’s Rs1,243 crore initial public offer got oversubscribed 51 times last week. The first share sale by a domestic stock exchange saw bids worth over Rs44,000 crore. Photo:
BSE’s Rs1,243 crore initial public offer got oversubscribed 51 times last week. The first share sale by a domestic stock exchange saw bids worth over Rs44,000 crore. Photo:

BSE listing: Sebi sets process to address potential conflict

In wake of BSE's listing, Sebi is geared to set up an independent conflict resolution committee having the final oversight role

New Delhi: The Securities and Exchange Board of India (Sebi) has instituted a three-tier system to monitor compliance and address conflicts that may arise from one stock exchange listing on another.

The final oversight will lie with an independent conflict resolution committee that will be constituted by Sebi itself, the regulator said in a statement on Friday.

Sebi’s move comes just two days after BSE Ltd’s Rs1,234.4 crore share sale offer was subscribed 51 times over. BSE will list on rival National Stock Exchange of India (NSE) on 3 February.

NSE itself has filed its share sale prospectus with the regulator as its existing investors look to dilute a 22.5% stake through an initial public offer which could raise as much as Rs10,000 crore.

The first order monitoring will be done by the listing department of the stock exchange where another bourse gets listed. For instance, when BSE gets listed on the NSE, the latter’s listing department will be the first one to address any conflict and monitor compliance, as it would do for any listed firm.

As a second level check, Sebi said the independent oversight committee of exchange on which another exchange gets listed will monitor and deal with any possible conflicts. If the listed exchange is aggrieved, it may appeal to this committee.

Additionally, Sebi itself will constitute an independent conflict resolution committee which will monitor and review matters on a regular basis. If the listed stock exchange feels aggrieved even with the decision of the independent oversight committee, it may appeal to this Sebi committee, the regulator said.

Sebi’s move gains importance because NSE has often cited cross-listing as one of the key hurdles to its initial share sale. While some other markets allow exchanges to list on themselves, Sebi doesn’t allow self-listing.

In a 23 January, 2016 Mint report, Ravi Narain, the vice-chairman of NSE, said, “The key issue that remains is that of securing approval for self-listing in the sense that given NSE’s superior liquidity, efficiency in price discovery and the potential to be included in NSE’s flagship indices and the downstream products, not to do so will be highly inappropriate and unfair to the investor community." NSE had even suggested some solutions to Sebi such as allowing only Sebi or a panel of public interest directors to look into the disclosures made by the exchange after listing, a 23 September Mint report said. NSE asked Sebi that its shares be allowed to trade as “permitted securities" on the NSE itself. “It is a welcome move," an NSE official said, noting past submissions made by the exchange to the market regulator. A person close to the BSE said, “It is a good move and puts an end to unnecessary controversies with proper checks and balances required for listed exchanges."

Both persons spoke on condition of anonymity since both exchanges are to get listed and their officials are supposed to refrain from making public comments till the completion of the listing.

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