By Ruma Dubey

SEBI once again stoked the embers which had almost gone cold… after all hopes were fired up since 2006 and then there was no action.

Looks like the listing of BSE and NSE is once again back in the reckoning. SEBI reviewed the listing norms and has put in place, what it see’s as “fit and proper” rules for listing the bourses.

• Maintains 51% shareholding of Public Category and ensuring that holding of trading members, associates or agents does not exceed 49%.
• To ensure compliance that every shareholder be 'Fit and Proper', all applicant in the IPO or Offer For Sale will be required to make declaration to this effect at the time of making application. SEBI has stated it will issue guidelines detailing what is “fit and proper”.
• SEBI to issue necessary procedures to ensure compliance of the provisions post listing.
• Shareholding threshold of 2%, 5% or 15% (for different classes of investors) as the case may be, will be monitored through Depository mechanism.
• To effectively implement the provisions of listing of its associates on listed stock exchanges, Sebi will also amend the definition of associates.
• Stock exchanges are no more required to transfer 25% of the profits to the settlement guarantee fund (SGF) of its clearing corporation.
• Stock exchanges will be classified as infrastructure Company under Sebi Regulations.
• SEBI does not allow self-listing.

This sudden interest in the listing on the bourses is surely at the behest of the FIIs – some 17 of them who are holding stakes in the BSE and NSE from many years. They need an exit route and they have been asking this question of listing for some time now. BSE had filed its draft document with SEBI way back in December 2013 while NSE preferred to wait out till all rules and regulations were laid out clearly.

This year, when Arun Jaitley had been to USA, to garner more FDI for the country and waxed eloquent about how things move very fast in India, he was put into a tight corner when asked about the listing of the exchanges.

Argonaut Private Equity Fund has bought around a 4.5% stake in BSE in 2009 and Toronto-based Caldwell Securities bought a 4.5% stake in BSE in 2007 for around $45 million. Now both are extremely perturbed with the dilly-dallying while on the other hand, the FM makes a speech saying that red tape is almost gone and things move fast in India now. But these two rightly questioned the FM whether it was really so.

Others holding stake are Goldman Sachs, Temasek, Morgan Stanley, Deutsche Boerse, Singapore Exchange, SAIF Partners, Tiger Global, Acacia Partners, Atticus Mauritius, Beacon India, Deccan Value Investors, GTI Capital, Norwest Venture Partners , Wolfensohn Fund Management  and General Atlantic. There are 17 FIIs having stake and together they hold 31.12% in BSE and 25.30% in NSE.

SEBI has also disallowed self- listing – the BSE can list on NSE but on itself and vice versa. An auto maker can use his own car for travel, airlines employees can fly on their own connections and computer makers can use their own laptops. So why not BSE getting listed on BSE? And this is not something which does not happen – Self listed exchanges across the world are – NYSE Arca,  Nasdaq, Australian Stock Exchange, the Frankfurt Stock Exchange (Deutsche Börse), Euronext N.V., the London Stock Exchange, OMX Group, and the Stock Exchange of Hong Kong. Yes, the question does arise whether the stock exchange will be impartial enough to apply the regulatory framework to itself the same way as to others.

Then there is the question of regulation – stock exchanges are different, not like a company. Stock exchanges are also regulators as they have regulatory powers over their markets and the market participants. So who regulates BSE when listed on NSE without giving rise to the question of conflict of interest? Clearly, SEBI and the Govt will need to be closely be involved – having more regulations for stock exchanges is what is done world over.  The existing listed stock exchanges have resolved this ‘conflict of interest’ problem by transferring all listing decisions to agencies independent from the stock exchanges and other market participants. These competent authorities are completely independent from all market participants and that’s what we also need here.

Going ahead, we are not exactly going to cruise in unchartered waters. WE have examples and guidelines to learn from exchanges listed across the world. Thus this new chapter is welcome. It will make the stock exchanges competitive and transparent.

Yes, we seem to have come a long way from shouting stock names on the trading floors and brokers ruling the roost. So would you like to own a share or BSE or NSE?