New Sebi panel to review stock exchange norms

The Securities and Exchange Board of India constituted a committee on Monday to review the norms for market infrastructure institutions such as stock exchanges, depositories and clearing corporations. The committee will be headed by former Reserve Bank of India deputy governor R. Gandhi.

Sebi’s move comes after it proposed a review of regulations related to ownership and governance of market infrastructure institutions earlier this year.

After its 11 February board meeting, the regulator announced a comprehensive review of Stock Exchange and Clearing Corporation (SECC) regulations, Securities Contracts (Regulation) Act and Sebi Depositories and Participants (D&P) regulations and sought public comments.

The review is in line with the recommendation of the Bimal Jalan committee, which tabled its report in 2012 and asked the regulator to conduct a review every five years.

After getting feedback from the market on various issues related to exchanges and clearing corporations, the market regulator decided to form a committee to review these norms.

The terms of reference of the committee include overall assessment of the adequacy of existing market infrastructure frameworks and identifying areas for review in other regulations.

The committee will also be required to identify areas that need continuous improvements, review procedures and practices followed by exchanges and depositories regarding listed entities and make recommendations for their improvement, Sebi said on its website.

As part of their suggestions, exchanges had proposed that salaries of exchange officials under SECC norms should be aligned with provisions of the Companies Act, 2013.

Mint had reported on 24 July that Sebi was looking to increase transparency in the appointment of public interest directors and independent directors and have norms in place to hold them accountable for their decisions.

On 5 October, a Sebi-appointed panel headed by Uday Kotak had recommended similar norms for independent directors of listed companies.

Sebi’s review is significant in the wake of Multi-Commodity Exchange Ltd and BSE Ltd getting listed and National Stock Exchange of India Ltd preparing for an initial public offering (IPO) in the next financial year.

“The review is a must at this juncture as the Bimal Jalan committee was not in favour of listing of exchanges. Post the merger of Forward Markets Commission with Sebi, the market regulator was faced with a situation that the commodity exchange was already listed and it cannot have differential regulations for the commodity and securities market. The review should look at the happenings at NSE and make a special mention of the technology-related issues pertaining to exchanges,” said J.N. Gupta, a former Sebi executive director and a member of the Jalan committee.