Union Finance Minister Arun Jaitley on Saturday interacted with the members and senior officials of the Securities and Exchanges Board of India (SEBI) at New Delhi. Minister of State for Finance Arjun Ram Meghwal, Secretary, Ministry of Finance Shaktikanta Das, Chief Economic Advisor Arvind Subramanian, Additional Secretary and Ministry of Finance Ajay Tyagi also attended the meeting.
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UK Sinha, Chairman, SEBI apprised the Finance Minister on the key recent developments and trends in the Indian securities market during the last few years and also the current and future agenda of SEBI as well as related issues affecting SEBI.
While addressing the media, Sinha said, “we head our first interaction with the Finance Ministry and we discussed the various items of implementation post the budget announcement. The status where SEBI has to take a decision alone, in areas where SEBI has to take the decision in coordination with different agencies like the RBI or the government.”
“By and large, we have come across a plan to implement those decisions. The Finance Ministers was informed about the condition of different markets and the issues which the markets are facing. We had a healthy discussion on that,” he added.
In the meeting, it was acknowledged during the discussion that the share of market based finance vis-à-vis bank finance had impressively gone up, particularly during 2015-16 and 2016-17 (till Jan, 2017).
There has been a tremendous rise in resource mobilisation by the mutual fund industry during the last few years. It was noted that the asset under management (AUM) of the mutual fund industry had substantially gone up almost 2.5 times from Rs. 7.01 lakh crore as on March 31, 2013 to Rs. 17.37 lakh crore as on January 31, 2017.
Similarly, net flows to mutual funds have been rising continuously every year since 2013-14 and during 2016-17 (till January 31, 2017), the industry had received net flows of Rs 3.68 lakh crore, witnessing a massive rise of almost 2.75 times over the net flow figure of Rs. 1.34 lakh crore during 2015-16. FM appreciated the huge growth and the emergence of mutual funds as an important savings vehicle.
During the interaction, reforms and regulations steered by the SEBI in the areas of ease of doing business, governance, corporate bond market, exit of regional exchanges, HFT/Algo trading were also appreciated. Need for further development of commodity markets in both the spot and derivatives segments and the recent Union Budget proposal to look into integrating the two segments were also highlighted during the discussion.
The Finance Minister remarked that the Indian securities market has witnessed very significant developments during last 5 – 6 years, particularly in the context of technology heavily influencing the market operations accompanied with increase in the size of markets. He also noted that regulations have been evolving fast during this period. He complimented SEBI and particularly observed that SEBI, as an institution has established lot of credibility for itself. He also mentioned about the recent Union Budget announcements relating to the securities market which would form as a part of the future agenda for SEBI.
Besides UK Sinha, Chairman, SEBI, the meeting was attended by members of the SEBI Board namely, Tapan Ray, Arun P Sathe, S Raman and G Mahalingam. Executive Directors and other senior officials of SEBI were also present.
The following decisions were taken:
1. SEBI Budget FY 2017-18
The SEBI Budget for the financial year 2017-18 was considered and approved by the Board.
The Board also discussed the plan of action for FY 2017-18. Some of the major initiatives proposed are as follows:
Reducing the listing time gap by bringing down the issue timing from the existing requirement of T+6.
Allowing, in consultation with Stakeholders and Regulators, institutional participation in commodity derivatives markets in phased manner.
Facilitating integration between Commodity Spot markets and Derivatives markets, SEBI to initiate consultation with various stakeholders.
Designing a system of Risk Based Supervision for commodity brokers.
Setting up a Cyber Security Lab for the securities market.
Allowing listing and trading of securitisation receipts issued by Assets Reconstruction Companies (ARC) etc.
Facilitating the objective of “Ease of doing Business”, introduction of common application form for registration, opening of bank and demat accounts, and issue of PAN for Foreign Portfolio Investors (FPIs).
Setting up a facility for online registration of intermediaries.
Strengthening the research initiatives in SEBI with special focus on research on commodity market, inter-linkages of various markets such as Equity, Forex, and Commodity etc.
Increasing its efforts in the areas of investor education/financial education and ensure that it covers all the districts in the country.
Enhancing engagement in the social and digital media for investor awareness programmes.
2. Offshore Derivative Instruments (ODIs)
The Board was informed about the various aspects of ODIs and the various steps taken by SEBI after September, 2014, The Board noted that in view of the strict norms for ODI issuance, the notional value of ODIs to the AUC of FPIs has declined over the years from a high of 55.7 percent of total asset under custody (AUC) in June 2007 to 6.7 percent in December 2016. The consistent tightening of ODI norms by SEBI has not only been through increased compliances but also improved transparency. It was also noted that simultaneous liberalization by SEBI in registration process of FPIs has made ODI less attractive vis-à-vis taking direct registration as FPI.
3. Review of regulations and relevant circulars pertaining to Market Infrastructure Institutions (MIIs) viz., Stock Exchanges, Depositories and Clearing Corporations
The Board noted the recommendation of Dr.Bimal Jalan Committee to review the working of MIIs after five years.
After deliberation, the Board approved the proposal for comprehensive review of Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012 and SEBI (Depositories and Participants) Regulations, 1996 and to seek public comments on the same. The consultative paper seeking Public Comments on the above will be made available on SEBI website.
4. Complaints against NSE’s co-location facility
The Board took note of the information memorandum on various references received related to colocation facility of NSE and the examination carried out by SEBI under the guidance the Technical Advisory Committee (TAC) of SEBI. As advised by SEBI, NSE’s Board has also undertaken an independent forensic audit on the matter. The Board also took note of steps taken by SEBI in consultation with TAC to strengthen the exchange’s trading infrastructure in the areas namely, fair and transparent data dissemination process, tools to monitor service quality of data feeds, mechanism to manage system load in a fair manner, direct connectivity between colocation facilities of exchanges, etc. The concerns related to systems and processes at the exchange arising out of examinations are being addressed in consultation with TAC and NSE’s Board.
5. Role of SEBI in NSEL matters
The Board was appraised about the actions so far taken by SEBI against some of the brokers on the basis of examination of allegations received with respect to their role in NSEL matters.
6. Other Items
The Board was apprised of the developments with respect to steps taken by Securities and Exchanges Board of India (SEBI) in connection with International Financial Service Centre, status of compulsory delisting of long suspended companies and companies on the dissemination board of National Exchanges etc. The Board was also appraised of the process of SEBI Settlement of Administrative and Civil Proceedings and the reasons for pendency of various applications thereon, for more than two years.