Sebi allowed stock exchanges to float IPOs last year, but many clauses are ambiguous and make listing unviable
Mumbai: India’s capital market regulator is set to review and modify norms that are proving to be hurdles for stock exchanges in listing their own shares through initial public offerings (IPOs).
Though the Securities and Exchange Board of India (Sebi) allowed stock exchanges to float IPOs for their own shares last year, many clauses in the regulations are ambiguous and make it unviable for the bourses to get listed.
Four persons familiar with the matter, including a senior Sebi official, said that five key areas of securities contracts regulations relating to stock exchanges and clearing corporations (SECC) are being reviewed and the changes will be notified shortly.
Both BSE Ltd and National Stock Exchange of India Ltd want to float IPOs. Following the recommendations of a committee headed by former Reserve Bank of India governor Bimal Jalan, Sebi in June 2012 overhauled the ownership and governance norms for exchanges and replaced its earlier norms with the SECC regulations.
While doing so, the market regulator also allowed the equity bourses to list their own stocks like any other corporation, though the Jalan committee had opposed this.
Sebi rules say that any stock exchange with three years of trading operations may list its securities on any recognized bourse, other than itself, as long as it is compliant with SECC rules with regards to ownership and governance. However, when stock exchanges actually geared up for IPOs and tried filing the prospectus with Sebi, the ambiguities in the extant norms surfaced.
The five areas of SECC regulations under Sebi’s review are norms on public shareholders and trading members and their definitions; the so-called fit and proper criteria; rules related to associate companies of the stock exchange; norms related to limits of shareholding by individuals after listing of the exchange; and norms on so-called persons acting in concert.
The persons cited above said either stock exchanges have to be given a substantial exemption on compliance with these rules or the regulations have to be streamlined by Sebi to make it feasible for an exchange to list its shares. They asked not to be identified.
BSE plans to sell a 10-25% stake in an IPO through the offer for sale route. The IPO is primarily meant to provide an exit to about 7,000 shareholders, most of whom have been holding stakes in Asia’s oldest bourse for several years.
All the four persons said BSE asked Sebi for certain exemptions from the SECC rules before filing its draft prospectus with the regulator.
“We have indeed asked Sebi for certain exemptions on SECC norms, but we will comply with whatever Sebi says," said a BSE official, who asked not to be identified
Sebi is yet to reply to BSE on the matter, but the regulator is likely to review the SECC regulations and bring in clarity soon, these people said.
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