Sebi-FMC merger to delay exchange IPOs

Says issues need to be sorted out before exchanges are given a green signal to list

A merger between the Securities and Exchange Board of India (Sebi) and the Forward Markets Commission (FMC) could delay initial public offerings (IPOs) by India’s stock exchanges. The merger is likely to alter the definition of the term ‘securities’ and this will have to be addressed before Sebi allows stock exchanges, including the BSE, to list.

Sebi Chairman U K Sinha on Tuesday said the integration had led to issues that had to be resolved before exchanges were allowed to list. “One (issue) is how will the exchange space shape up with the commodity market coming to Sebi. Those (commodity) exchanges will technically become securities market exchanges. So, there are issues around that,” Sinha said on the sidelines of an event organised by the Indian Merchants’ Chamber.

“Since commodity futures will be defined as securities, these (commodity exchanges) could technically demand and be eligible for trading in (equity) futures,” he added.

Sinha said Sebi was working towards resolving these issues and it would take another six months to enable exchanges to list.

He said the regulatory functions of exchanges had to be separated, before these entities were allowed to go public. “Today, exchanges in India are performing regulatory functions. These include regulation of brokers and listed entities... We are trying to evaluate whether we are comfortable with the current arrangement,” he said.

The BSE has, in the past, made public its plans to list. It had also appointed investment bankers to manage its IPO. The BSE’s bigger rival, the National Stock Exchange, hasn’t announced any plan to list yet.

On the status of the merger between Sebi and FMC, Sinha said, “The (finance) Bill, in its present form, says the government will provide a date for the merger…In the meantime, Sebi and FMC are working together. We have formed teams and are trying to understand various nuances... the manpower that will be required.”