By Ruma Dubey

Finally, the much awaited norms on listing of the bourses on bourses was spelled out by SEBI. A quic look at what the rules of the game are:

Ø  An exchange cannot be listed on itself. Thus BSE could get listed on the NSE and NSE on the BSE.

Ø  Depositories can be listed, but not exchange clearing corporations

Ø  Mandatory for exchanges to have 51% public holding

Ø  Banned brokers from boards

Ø  To float an IPO, the exchange will need to complete at least three years of operations.

Ø  Capped individual holding at 5%;

Ø  Minimum networth of bourses at Rs 100 crore; existing exchanges will be given three years to achieve this.

Ø  Minimum net worth for other Market Infrastructure Institutions (MIIs) such as clearing corporations and depositories will be Rs.300 crore and Rs.100 crore, respectively.

Ø  The stock exchange, depositories, insurance company, banks or public financial institutions may hold up to 15%

Ø  Restrictions on salaries of key management.

Ø  Board of the stock exchanges/clearing corporations will not have any trading member/clearing member representative.

Ø  Advisory committee shall be constituted by the Board, comprising trading members/ clearing members to take benefit of experience of such members.

Ø  Framed exit norms for regional stock exchanges, most of which are dormant and are looking to liquidate their assets.

This comes as a relief as finally the BSE and NSE could get listed. Well, if the MCS-SX could be listed on the BSE and NSE, this was a ruling which should have come much earlier. SEBI sat on the Bimal Jalan report for over 16 months and probably the listing of MCS finally prompted it to wake up. Better late than never! Some of the biggest stock exchanges in the world -NYSE-Euronext, Australian Securities Exchange, London Stock Exchange and Deutsche Bourse are listed.

There is sure to be a complete rejig in the BSE Board room following this. The current Board of Directors of BSE comprises of the Chairman and CEO, which is Mr.Madhu Kannan; there are two Public Interest Directors – Mr.Sudhakar Rao and Mr.Sanjiv Mishra; there are three ‘shareholder director’ – Mr.Dipak Chaterjee, Mr.Andreas Preuss,  and Mr.Keki Mistry; finally there are three trading member directors – Mr.Uttam Bagri, Ms.Deena Mehta and Mr.Anil Mehta. The non-executive Director is Mr.S. Ramadorai; Vice President TCS.

The big issue when the Jalan report came out 16 months ago was that of conflict of interest between regulatory and business functions. Addressing this, SEBI has stated that autonomy of regulatory departments in stock exchanges and other MIIs (depositories and clearing organisations) would be maintained.  It has prescribed a ‘dual reporting’ structure, whereby the heads of departments of listing regulation, the member for regulation and listing regulation will directly report to an independent committee of the board of the stock exchange as well as to its MD/CEO. But it has not yet set a timeline on this but stated that exchanges must set aside a seed fund that will eventually be used to set up such an independent regulatory organization. 

The valuation of NSE is placed at around Rs 17,100 crore and BSE at about Rs 4,200 crore. And over the last 2-3 months, the BSE shares have gained after having fallen consistently. The stock of BSE is said to be around Rs.185-200 currently, up from around Rs.145 in Dec 2011. When the Jalan report came in 2010, the BSE share price was at Rs.350-400 levels and as the days grew and prospects of listing grew dimmer, many sold off their holdings. In the coming days, we could see a mad scramble in the off market deals to get hands on these shares.  In 2007, BSE had offered shares worth at Rs.5,200/per share to its members as part of the demutualisation process, to ensure that non-trading members held a majority stake in the company. In 2009, a 12:1 bonus was issued and the share was split and that put the share price at around Rs.400.

Till end of 9MFY12, the BSE had a total income of Rs.415 crore and despite the huge LEIP incentive at Rs.19 crore, its net profit stands at Rs.141 crore.. Its paid-up equity on a face value of Re.1 per share stands at Rs.10.34 crore. Its reserves as at end of FY11 stood at Rs.2114.47 crore.