'Decision based on best practices and investor protection'

A day after the Securities and Exchange Board of India (Sebi) decided on the ownership and governance structure of market infrastructure institutions (MIIs), including stock exchanges, chairman U K Sinha is happy with the outcome.

“I think the structure has been clearly outlined now and all the issues and problems have been addressed comprehensively,” Sinha told Business Standard.

He said the decisions were in tune with the interest of the shareholders.

Designing a suitable model for the governance and ownership of market institutions on the basis of the Jalan committee recommendations was one of the main items on Sinha’s agenda when he took over as Sebi chairman in February 2011.

WIN SOME, LOSE SOME
Sebi’s moves on market infrastructure institutions and their impact

• Recognising off-balance sheet items 
  May hurt MCX-SX, as founding shareholders hold 60% interest through warrants 
• 24% cap on holding in depositories 
  BSE (54%), NSE (26%) to cut stakes in CDSL & NSDL 
• CC net worth at Rs 300 crore
  BSE, MCX-SX to infuse capital in 3 years 
• Listing permitted 
  BSE may succeed in its attempts to list itself 
• 51% holding by public 
  Trading members may cut stake in USE and MCX-SX
• Limits on remuneration of top brass. Attracting top-level talent to get tough
  Annual pay package for NSE MD and deputy MD at Rs 4-7 crore and for BSE and MCX-SX, Rs 1-2 crore 
• 25% profit to settlement, investors’ funds 
  Indirect cap on profit may hurt valuations

Accepting most recommendations of the Jalan panel, Sebi has now allowed 51 per cent stake of bourses to be held with the public, diversified ownership in stock exchanges with curbs on single-investor participation and listing of exchanges after three years from the date of approval, among the steps taken across the board.

Sinha pointed out the regulator was governed by norms for investor protection and followed internationally accepted best practices.

Permitting stock exchanges to list after three years is among the few measures, which have deviated from the Jalan panel recommendations that did not favour listing.

Maintaining that the regulator had tried to accommodate all aspects, Sinha said the new structure would be able to handle all issues pertaining to the governance and ownership of MIIs.

The Sebi chairman, however, declined comment on whether this would resolve the MCX-SX issue, saying he would not comment on individual cases.