Centre Eyes Spv For Demutualisation

The government is considering the special purpose vehicle (SPV) route as one of the options for demutualisation of stock exchanges in the country.

According to government sources, the equity of the SPV can be taken as the combined paid-up capital of all the regional stock exchanges. Financial institutions and banks can then be allowed to pick up stake in the SPV, they said.

Sources said the government is of the view that member-brokers could not be the beneficiaries of the huge reserves and surplus of the exchanges.

The bourses, being non-profit organisations, have built up such reserves primarily on account of the income-tax exemptions allowed to them under Section 12 of the Companies Act, 1956.

The corporatisation and demutualisation process in the stock exchanges would be more or less on the lines of the National Stock Exchange model, finance ministry officials said. In NSE, the ownership lies with the financial institutions and banks, and brokers are given only trading rights. The exchange is run by non-broker professionals.

As a prelude to demutualisation, the Securities and Exchange Board of India (Sebi) has already directed all the stock exchanges to suitably amend their bylaws banning brokers from occupying top slots of president, vice president or treasurer in the exchange.

In a written directive to the bourses on January 10, Sebi chairman D R Mehta has given them a two-month deadline to change their rules and bylaws.

The regulator has also decided to withdraw its nominee on the board of the stock exchanges. The decision which was taken during the Sebi board meeting on December 28, 2001 was implemented on January 11 when it wrote to all the stock exchanges informing them about withdrawing its nominee.

In a meeting on January 12 in Bangalore, the presidents of over a dozen regional stock exchanges decided to chart the course of action following the recent moves of the regulator.

They would be meeting soon to discuss their future strategy in the demutualised environment. The possibility of the government setting up a Central Listing Authority to monitor the listing requirements of the companies would also be discussed, market sources said.