In a move that could make it difficult for corporate entities to set up stock exchanges, a Securities and Exchange Board of India committee on Tuesday recommended that only banks and public financial institutions could be anchor investors in bourses and stopping them from listing or making huge profits.
According to industry sources, the recommendations would make things difficult for FTIL group-founded new bourse MCX-SX, which is allowed to trade only in currency futures, and its plea for trading in equity and other segments has already been rejected by SEBI on non-compliance with shareholding and other norms. SEBI has invited comments from the public by December 31.
The panel suggested a minimum net worth of Rs.100 crore for the stock exchanges and allowing only banks and public financial institutions as the anchor or main investors. These anchor investors would need to be identified in the application itself by any entity seeking permission.
For anchor investors also, the committee has suggested a minimum Rs.1,000 crore net worth.
The committee also suggested disallowing the stock exchanges to list themselves, although it recognised the benefits of listing in terms of providing investors an exit route. But the disclosures and corporate governance requirements of the listing agreement would still be applicable on the bourses.
On profits, the committee suggested that the stock exchanges should be allowed to make only ‘reasonable' profits, although it stopped short of recommending any clear-cut cap on profitability and left it for SEBI to monitor and act against any super-profits that are made.
The high profits of larger bourse NSE has been a subject matter of sharp criticism by the newer entrant MCX-SX. The recommendation of the Bimal Jalan Committee, if accepted, would derail the plans of the country's two premier bourses — the BSE and the NSE — to go public.
“Market infrastructure institutions (MIIs) being public institutions, any downward movement in its share prices may lead to a loss of credibity and this may be detrimental to the market as a whole. Therefore, the Committee is not in favour of permitting listing of MIIs,” said the report.
The Jalan committee, which submitted its proposals after months of deliberations, also said that disclosure and corporate governance norms for market institutions should be the same as that applicable for listed entities.
In case of companies wherein stock exchanges hold 24 per cent or more, that entity would have to seek prior nod of SEBI.
“Further if an entity chooses to get itself listed on a stock exchange and is substantially owned (24 per cent or more of equity capital) by that stock exchange or by an MII in which that stock exchange holds shares, then such entity shall seek prior approval from SEBI before listing,” it said.