The Finance Ministry is not averse to the idea of segregation of regulatory and commercial role of stock exchanges. However, it is still undecided on what could be the best model that could be adopted and where should the regulatory functions be housed in case they were to be removed from the bourses.
At a workshop on the Bimal Jalan Committee report on how to run bourses, senior officials of the Finance Ministry were understood to have recognised the global experience of segregation preceding the listing of bourses. There was virtual unanimity among representatives of stock exchanges on the need for segregation as pre-condition for listing of bourses.
The thinking in the Finance Ministry is that the regulatory and surveillance functions of stock exchanges could be hived off completely to SEBI or “partly in SEBI and partly in a self regulatory organisation.”
Contentious issues
If segregation were to be done to facilitate listing, then stock exchanges in India may lose the status of being the first level regulators. The thinking that guided the Bimal Jalan Committee report was that bourses should continue to be first level regulators and that time was not ripe for segregation of commercial and regulatory roles or even listing of bourses.
On listing of bourses, all the stock exchanges that attended Friday's workshop favoured listing. This was contrary to the Bimal Jalan Committee's recommendation that bourses should not be allowed to be listed for now.
Stock exchanges were also opposed to the Bimal Jalan committee recommendation that profits of bourses needed to be capped. Any capping of profits would be totally counter-productive as profits work as major motivational factor for any investor and encourage promoters to innovate and perform well, the representatives of bourses contended.
Consensus on stake
On ownership levels in stock exchanges, there was a larger consensus among representatives of bourses that anchor investor be allowed to hold 26 per cent stake. The Bombay Stock Exchange CEO, Mr Madhu Kannan, is understood to have pitched for 26 per cent stake to be allowed for anchor investors in stock exchanges.
At today's workshop, Dr Bimal Jalan, who headed the committee, is understood to have made a case for the capital market regulator to “hasten slowly” in changing the existing rules and framework. This was needed as financial markets here are still evolving and faced uncertainties due to external factors, he said.
The Economic Affairs Secretary, Mr R. Gopalan and Mr Thomas Mathew, Joint Secretary (Capital Markets), and other senior officials of Finance Ministry attended the workshop.
The Finance Ministry is yet to take a formal view on the Bimal Jalan committee report and today's workshop was an attempt to gauge the stock exchanges views on the report, official sources said. At today's deliberations, many of the recommendations of the Bimal Jalan committee were stiffly opposed by the bourses, especially those that sought to curtail their propensity to make profits.
The SEBI Board is yet to consider the Bimal Jalan Committee report. The Finance Ministry has to take a view on this report as it finds representation in the SEBI Board.