Sebi board may take up Jalan report next week

The Securities and Exchange Board of India (Sebi) is likely to decide on the issue of listing of market infrastructure institutions (MIIs), such as stock exchanges, at its board meeting scheduled on April 2.

The listing of MIIs turned controversial after a Sebi-appointed committee headed by former central bank governor Bimal Jalan had recommended against it. According to sources, the finance ministry is also likely to give its views on the subject before the scheduled board meet.

The Jalan committee was formed by the capital markets’ regulator to review ownership and governance norms for MIIs. The committee had given its report to Sebi in November 2010. It had said stock exchanges should be barred from listing and there should be a cap on their profits to ensure these were only ‘reasonable’. Further, it had prescribed ownership restrictions and segregation of ‘commercial’ and ‘regulatory’ roles of exchanges.

The recommendations of a cap on profits and disallowing of listing have seen strong opposition from stock exchanges, including the Bombay Stock Exchange and the MCX-SX.

MIIs, which include stock exchanges, clearing corporations and depositories, are systemically important institutions that also undertake regulatory functions.

In a recent interview to Business Standard, Ruben Lee, CEO, Oxford Finance Group, had said competition among exchanges is beneficial and had suggested a profit-based model for MIIs. “The for-profit model has a lot of strengths. It may lead to efficiency, it may mean you don’t need to only satisfy your members’ interest, you may satisfy wider markets’ interest, meaning you could raise capital more easily,” Lee had said. The Sebi board is also likely to finalise the regulations on alternative investment schemes. The finance minister on March 24, while addressing the Sebi board, had asked it to expedite regulations on these schemes. The FM had said unregulated private pools of capital pose a risk to the system. Alternative investment schemes include private equity funds, real estate funds and venture capital funds.