Sebi committee against listing of stock exchanges on bourses

A Sebi-appointed committee today opposed listing of stock exchanges on bourses arguing that any downward movement of their share prices could hit  the credibility of the market institutions.

The recommendation of the Bimal Jalan Committee, if accepted, would derail the plans of the country's two premier bourses -- the Bombay Stock Exchange (BSE) and the National Stock Exchange (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 on which Securities and Exchange Board of India (Sebi) has invited comments from the public by December 31.

Many foreign investors had picked up equity in India's oldest stock exchange BSE in the hope that its shares would be listed on stock markets.

In August last, billionaire investor George Soros had picked up a 4 per cent stake in BSE for USD 35 million. Soros' Quantum hedge fund bought the stake from Dubai Financial, a part of state-run Dubai Holdings, for an estimated Rs 380 per share.

In February-March 2007, Deutsche Boerse AG and Singapore Exchange Ltd acquired 4.98 per cent each of BSE's stake at the time when the exchange was demutualised.

Foreign investors now hold 30 per cent stake in BSE, lower than the permissible limit of 49 per cent.

The Jalan committee, which submitted its proposals after months of deliberations, also said that disclosure and corporate governance norms for market instutions 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 the Securities and Exchange Board of India (Sebi), the market regulator.

"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 enetity shall seek prior approval from Sebi before listing," it said.

The report from the committee, whose members included prominent banker Uday Kotak and industrial conglomerate Tata group's senior executive Kishore Chauker, could be taken up for consideration in the next meeting of the Sebi board.

The report also prescribed that stock exchanges would have to maintain a minimum net worth of Rs 100 crore at all times.

The committe has recommended that in case a bank does not meet the net worth requirement, they may be given a period of 10 years to comply with the same.