The Securities and Exchange Board of India (Sebi) on Saturday decided to undertake a comprehensive review of regulations for stock exchanges and clearing corporations. The regulator has proposed a reduction in time-gap between the initial public offer (IPO) and listing, allowing institutional participation in commodity derivative markets and listing of securitisation receipts issued by assets reconstruction companies.
The proposal for review of regulations is in line with recommendations of a committee headed by former Reserve Bank of India governor Bimal Jalan and a discussion paper would be floated soon for it, the market regulator said. Detailing the proposals, Sebi said it intends to shorten the gap between an IPO and the listing of shares from the current six days (T+6), which will help reduce risks related to market volatility, which may emerge within that period. In several developed markets, the time between an IPO and the time-gap for listing of shares is one day.
For commodity derivatives markets, Sebi would allow institutions like MFs and banks to participate in a phased manner. Sebi also discussed allegations of unfair access at the National Stock Exchange’s (NSE’s) co-location facility and reviewed the participatory note (P-note) framework.
On the issue of unfair access at the NSE, Sebi said its technical advisory committee and the exchange’s board were addressing concerns related to systems and processes. “The board took note of steps taken by Sebi to strengthen data dissemination, monitor service quality of data feeds, manage system load, and direct connectivity between co-location facilities of exchanges,” Sebi said in a release.
The Sebi board discussed steps taken by the market regulator to tighten the norms for offshore derivative instruments (ODIs) or P-Notes, complaints against the National Stock Exchange’s co-location facility and action taken against some of the brokers found to be involved in irregularities in the erstwhile NSEL.
“We are in constant dialogue with SIT (special investigations team). Our feeling is that the measures taken by Sebi with regard to ODIs are sufficient enough to satisfy the SIT. If they come out with something new, Sebi will have to take that into consideration,” Sinha said. The Supreme Court-appointed SIT has recommended increase in regulatory oversight of money laundering in stocks, as well as black money being repatriated to the country through investments in equity derivative products like participatory notes.
As on February 2015, about P-notes worth Rs 2.75 lakh crore were outstanding. Following stricter norms for P-Notes, Sebi said the notional value of ODIs to the assets under custody (AUC) of FPIs has declined over the years from a high of 55.7 per cent of total AUC in June 2007 to 6.7 per cent in December 2016. The Sebi Board also discussed the action taken against brokers in the Rs 5,600-crore NSE scam. Sebi has sent notices to five brokers for alleged violation of securities norms.