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Mumbai: The covid-19 pandemic has thrown up extreme challenges as well as opportunities for reforms, said Ajay Tyagi, chairman, Securities and Exchange Board of India (Sebi), at the capital markets summit organized by industry body Federation of Indian Chambers of Commerce and Industry (Ficci) on Wednesday.

One of the reforms being considered is to allow brokers to work and trade from home on a permanent basis, thereby doing away with an old rule preventing brokers from operating trading terminals from locations other than those reported to the exchange.

“Stock brokers working permanently from home is worth considering. Currently the trading from home has worked without a glitch or default. At present working from home is a temporary relaxation. We will also analyse the downsides," said Tyagi.

The change comes after compliance relaxations given to brokers during the coronavirus lockdown allowed them to operate terminals from home or other remote locations.

Mint had reported on 15 June that Sebi was considering this move as lockdown trading experience has strengthened the argument that modern trading systems are entirely electronic and should not be reliant on location of things or people.

Tyagi also touched upon the issue of increased retail participation in equity markets. The number of demat accounts during the months of lockdown have increased suggesting that many of these investors are first-time investors.

“There is a huge jump in retail participation. All I am saying that they need to be well informed before investing. Perhaps they could start by investing in government securities (G-Secs) as these are safer instruments and will lead to a more gradual entry of investors in capital markets. Perhaps government should look at issuing G-Secs through demat," said Tyagi.

According to Sebi data, the number of new demat accounts opened in fiscal year 2020 was the most in at least a decade at 4.9 million, a 22.5% jump from the 4 million accounts opened in the previous year. Turnover of small individual clients of stock brokers had risen 140% since the beginning of June. Tyagi also noted that the number of new demat accounts in June was significantly higher at 1.02 million compared to the monthly average of pre-covid-19 period.

Tyagi referred to the covid-19 pandemic as an unprecedented challenge which has brought business and economies to a standstill with no reference point to rely on. However, the fund-raising activity during the lockdown suggests that the situation is not all that bad.

“We have made a concentrated effort to ease fund raising methods for corporates. All possible methods of fund raising have been eased. Preferential issues rules were eased on temporary basis as a means to restructure stressed assets in absence of Insolvency Bankruptcy Code (IBC)," said Tyagi.

IBC has been suspended till the end of the year as a relaxation to help companies tide through the financial hardships brought on by the covid-19 pandemic.

The key fund-raising avenues eased by the market regulator includes fast tracking of rights issues, extension of offer documents, relaxing eligibility criteria for fast track of future public offers, relaxation of rules of buyback of securities, preferential allotment relaxations.

“Relaxation of qualified institutional placement (QIP) pricing norms is not in Sebi’s radar," said Tyagi.

According to the Sebi chief, the development and reform of bond market should be done without loss of time. “Development of bond market needs to be top most agenda for policymakers," said Tyagi.

Today, trading and investment in corporate bonds is restricted to only top three categories of super rated bonds, almost 90%. He highlighted the need for more players such as institutional investors.

He also said that the unification of financial markets is needed.

ABOUT THE AUTHOR

Jayshree P Upadhyay

Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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