Sebi to set framework for overseas indices

Will lay down criteria for market cap and liquidity.

Indian stock exchanges that wish to launch trading facility in overseas indices will have to wait for some more months as the Securities and Exchange Board of India (Sebi) is working on a detailed regulatory framework to govern cross-listing arrangements.

According to a person privy to the development, the regulator aims to get only “good quality” indices in India and so would lay down the criteria for market capitalisation and liquidity. Only those overseas indices that fulfill these criteria would be allowed to trade on the Indian bourses.

Currently, there are no such guidelines and it is believed that the process will take around three to four months. The regulator plans to put in place comprehensive norms that would serve as the base for all such future alliances.

“The work on the regulatory framework is on and the process will take around three to four months,” said a person not wishing to be named. “Having a regulatory structure in place is better than evaluating cross-listing arrangements on a case to case basis. The guidelines will also serve as a base on which future cross-listing tie-ups can be done,” he added.

Currently, the National Stock Exchange (NSE) is the only Indian equity bourse that has entered into cross-listing arrangements. Under the arrangement with the Chicago Mercantile Exchange (CME), NSE has exclusive rights for starting trading in the S&P 500 and the Dow Jones Industrial Average rupee-denominated futures contracts for trading in India. This is being made available to NSE via sub-licences from the CME Group, Standard & Poor’s and Dow Jones, respectively.

“Exchanges cannot just go out and get any index in the Indian market. Some conditions need to be fulfilled,” said the person. “The regulator might also lay down the geographies from where the indices could be brought for trading on the Indian stock exchange platform,” he added.

This issue assumes significance, as the Indian exchanges are looking at increasing their bouquet of offerings to garner more market share and also to enhance their overall valuation. Globally, some of the leading bourses like Chicago Mercantile Exchange and SGX boast of offering trading facilities in a number of overseas indices.

Meanwhile, NSE has also signed a letter of intent with the London Stock Exchange for getting the FTSE 100 in India. “As part of the letter (of intent), both exchanges declared their intent to explore the feasibility of an agreement whereby FTSE Group may licence the FTSE 100 Index to the NSE, and whereby the NSE may licence the S&P CNX Nifty to London Stock Exchange Group for the purpose of issuing and trading options and other index contracts,” says the NSE release dated July 28.

MCX Stock Exchange (MCX-SX) has also entered into a tie-up with FTSE to facilitate creation of international investment products — including international FTSE indices — to be listed and traded on MCX-SX.