Sebi to accept NYSE’s broker-based set up

Sharad Mistry

Mumbai, Jan 1: After barring brokers from taking up any official position on the board of the bourses, the Securities and Exchange Board of India (Sebi) now mulls whether or not to allow them on the board as on the New York Stock Exchange (NYSE) or go for the totally professional board structure as of the National Stock Exchange (NSE). The decision on the bourse board structure is aimed at giving the final shape to the most vital and controversial subject of demutualisation and corporatisation of the stock exchanges that has been debated since early last year.

It was in March 2001 that all broker members from the board of the stock exchanges were asked to resign. Accordingly, the SEs are currently run by the public representatives.

Last Friday, Sebi board said brokers will not be allowed to take up the position of president, vice president, treasurer etc while also doing away from appointing its own representatives from stock exchanges board. The administrative and legal modalities for corporatisation and demutualisation of SEs are being worked out, it said.

“We are currently studying couple of administrative structures of stock exchanges around the world including that of the NYSE and the NSE as also the proposals on demutualisation and corporatisation sent to us by the stock exchanges”, said a top source at Sebi.

As the new administrative structures of domestic bourses even includes corporatisation, the Sebi board will have to consider these various proposals in consultation with concerned authorities including, the finance ministry, the department of company affairs and the law ministry, the Sebi official said.

After the Sebi’s decision, the Calcutta Stock Exchange (CSE) on Saturday announced it has elected nine directors on its board and said it meets Sebi’s latest guidelines on SE board structure. This development at CSE has not been objected by the Sebi, which observes say, indicate that the market regulator is not averse from broker directors being elected as members of the SE board. The crucial point however, is who will be the president: whether from the stock brokers on the board or the public representatives selected and cleared by the Sebi.

The CSE’s board structure is almost similar to the one at the NYSE, where the stock brokers are allowed to be members on the board of the exchange along with public representatives. However, on the NYSE, the president, elected from the member brokers on the board, has to stay away from his active stock broking business till he remains as the bourse president.

The NYSE structure gives the much required professional insight and guidance in the running of the exchange. In India too, the local bourses, set up by the stock brokers themselves, unlike the NSE, would prefer their presence on the board of the exchange.

On the other hand, the NSE, set up by finances from the state-owned financial institutions, is fully run by professionals and the broker members do not have any say in running of day to day affairs.