Corporatisation of bourses gets nod

The bill allows for up to 51 per cent of the management to be owned by retail investors and caps the ownership and voting rights of brokers to a maximum of 25 per cent. This means exchanges like the Bombay Stock Exchange and others will have to change their management structure by converting them into companies. Many scams — including the 1998 rigging and insider trading by a former president — surfaced in the recent past as the BSE was controlled by brokers.

Currently, these exchanges are controlled by associations of brokers, while investors have no role in their functioning. As per the new rule, exchanges can offer shares to investors — through IPOs — and become professional companies.

Replying to a brief discussion on the bill in the Lok Sabha on Tuesday, Finance Minister P.Chidambaram said the aim of the bill was to separate the three functions of the stock exchange — right to trade, its management and ownership of businesses. The Finance Minister said all stock exchanges should function along the lines of the National Stock Exchange, which was the best model.