Sebi mulls separate listing norms for companies

To set up expert committee to assess operational changes for clearing corporations

Listing norms for companies are set to get tougher. In the wake of losses to equity investors due to the poor quality of initial public offerings and companies being suspended from stock exchanges, the Securities and Exchange Board of India (Sebi) has decided to prescribe minimum listing standards.

It has said it would set up a committee of experts to assess the feasibility of a single clearing corporation (CC) or allow inter-operability among multiple CCs. It is to also amend the regulations governing depositories, to cover their ownership and governance norms.

A CC takes care of clearing and settlement operations, which involves payment obligations of buyers and sellers, after trade matching and execution of orders is done on a stock exchange. Depositories are like banks, where shares are kept in electronic form.

Currently, both the Bombay Stock Exchange and National Stock Exchange have separate CCs, fully owned by them and with no inter-operability. Trades done on both exchanges are settled through their own CCs and both are trying to consolidate their clearing and settlement business, as is the global trend.

According to market players, having a single CC is likely to benefit investors. “Right now, if the investors have a sell exposure on a CC and a purchase exposure on the other, they have to pay a margin at both CCs. A single CC will eliminate the need for a double margin and mainly help day traders,” said one.

Recently, Sebi had also asked exchanges to bring down the shareholding in their respective CCs to 51 per cent and asked them to infuse more capital, a move criticised by many. However, now that a committee will be set up to look into operational aspects of CCs, exchanges will have to wait and watch. The committee will also specify norms for utilisation of profits and investments by recognised CCs.

Further, to resolve all conflict of interest issues among market infrastructure companies, Sebi has decided to form a Conflicts Resolution Committee (CRC), with a majority from external and independent members. The CRC will consider matters of policy, guidelines involving conflict issues and recommend standards that are pertinent to the areas of potential conflict in the exchanges. These issues, said Sebi, will be referred by exchanges or may be taken up by the CRC on its own initiative.

The independent oversight committees of the exchanges for member regulation, listing functions and the trading and surveillance function, will have regular interaction with the CRC, said Sebi. It has also proposed to frame norms for adequacy of the core corpus of the Settlement Guarantee Fund and the Trade Guarantee Fund.