Sebi may relax owner limits in stock exchanges

The Securities and Exchange Board of India (Sebi) has floated a discussion paper on the possibility of allowing stock exchanges, depositories, clearing corporations, banks and insurance companies to hold up to 15 per cent against the current individual shareholding limit of 5 per cent.

These investors may be allowed to hold the higher stake directly or indirectly in stock exchanges, according to the discussion paper. Sebi has invited comments till September 19.

The higher limit applies only to domestic institutional shareholders. “Any other shareholder may hold not more than 5 per cent of the paid-up equity share capital of a recognised stock exchange, either directly or indirectly, under the existing MIMPS Regulations,” Sebi said in the discussion paper.

MIMPS Regulations refer to the Manner of Increasing and Maintaining Public Shareholding in Recognised Stock Exchanges Regulations of 2006.

The regulator put out this paper after receiving submissions from shareholders of the National Stock Exchange (NSE) and Over the Counter Exchange of India (OTCEI).

Both exchanges have expressed several difficulties, including the failure to arrive at a proper price-discovery mechanism and realising appropriate value of their investments, in finding eligible buyers to bring down their shareholding to the prescribed 5 per cent level.

Sources said this policy would help the regional exchanges more than the two Mumbai-based exchanges in which several institutional investors have holdings exceeding 5 per cent.
 

PUSHING THE LIMIT Major institutional shareholders in the Big Two bourses
NSE		BSE
IDFC	8%	LIC	5%
SHCIL	7.11%	SBI	5%
SBI	8.50%	Deutsche Borse	5%
NYSE	5%	SGX	5%
SAIF	5%	-	-

For instance, the Bombay Stock Exchange (BSE) holds 5 per cent in the Calcutta Stock Exchange. Others like the Delhi Stock Exchange (DSE) and Ahmedabad Stock Exchange (ASE) have also expressed their intention to rope in a strategic investor.

According to agency reports, Deutsche Bank was looking to pick up 5 per cent in the DSE. The exchange also sold 5 per cent to overseas firms for a consideration of Rs 10.61 crore each. Some of the firms which picked up stakes were Mauritius-based Wilmette Holdings, Kuwait’s Noor Financial Investment and Ikarus Industrial Petroleum Company.

Present regulations restrict foreign investment in stock exchanges, depositories and clearing corporations to 49 per cent with foreign direct investment (FDI) limit capped at 26 per cent and foreign institutional investment (FII) limit capped at 23 per cent.

Foreign investors cannot individually hold more than 5 per cent equity in stock exchanges, depositories and clearing corporations.