SEBI Reviews IPO Norms For Stock Exchanges

After MCX came out with an IPO (after too much of resistance) SEBI is set to review and modify norms that are proving to be hurdles for stock exchanges in listing their own shares through IPOs.The reason is quite simple, though the SEBI allowed stock exchanges to float IPOs for their own shares last year; many clauses in the regulations are ambiguous and make it unviable for the bourses to get listed. News reports suggests that the five key areas of securities contracts regulations relating to stock exchanges and clearing corporations (SECC) are being reviewed and the changes will be notified shortly. Both BSE and National Stock Exchange of India want to float IPOs. Following the recommendations of a committee headed by former Reserve Bank of India governor Bimal Jalan, SEBI in June 2012 overhauled the ownership and governance norms for exchanges and replaced its earlier norms with the SECC regulations. Doing so, the market regulator also allowed the equity bourses to list their own stocks like any other corporation, though the Jalan committee had opposed this.

SEBI rules say that any stock exchange with three years of trading operations may list its securities on any recognized bourses, other than itself, as long as it is compliant with SECC rules with regards to ownership and governance. However, when stock exchanges actually geared up for IPOs and tried filing the prospectus with SEBI, the ambiguities in the extant norms surfaced.As regards the five norms under the review are as follows. First is about public shareholders and trading members and their definitions. Second is about the so-called fit and proper criteria. Third is about rules related to associate companies of the stock exchange. Fourth is about norms related to limits of shareholding by individuals after listing of the exchange. And final one is norms on persons acting in concert. Few changes are expected in the norms mentioned above.

On the IPO front, BSE plans to sell a 10-25% stake through offer for sale route. The offer is primarily meant to provide an exit to about 7,000 shareholders. Similarly NSE is looking for an IPO. However we are of the opinion that, with MCX facing certain issues related to the NSEL, the norms of would be reconsidered, especially in terms of rules related to associated companies