A major policy shift with respect to shareholding norms in stock exchanges is on the anvil. Market regulator Securities & Exchange Board of India (Sebi) is in favour of an ?anchor investor? concept for stock exchanges, where this investor can be allowed to hold as much as 15-20% in a bourse. Extant norms restrict a single investor?individual or institutional?to 5% holding in a stock exchange.

This move will be articulated by Sebi in a discussion paper shortly and then presented at the next board meeting. The entire process would be completed by the end of the calendar year, and will lead to a sea change in the stock exchange space.

Effectively, this will mean an anchor investor, who can be an individual or an institution, will drive the affairs of the exchange and be at the helm, controlling it. This move is aimed at avoiding the creation of monopolies among bourses, with one or two large exchanges dominating the space. This can also facilitate the setting up of new exchanges and healthy competition among them.

The country?s two largest exchanges, NSE and BSE, have strategic investors holding the maximum permitted 5% each. While NYSE Euronext holds 5% in NSE, Deutsche Boerse and Singapore Exchange Ltd (SGX) hold similar stakes in BSE.

The Sebi move comes at a time when the government has set a deadline of June 30, 2009, for commodity exchanges to comply with foreign investment norms, which include restricting a single foreign investor?s holding in a commodity bourse to 5%.

Sebi feels that the norms of shareholding by institutional and strategic investors in stock exchanges need to be reviewed, it is reliably learnt. The upper ceiling on a single investor?s holding at 5% is hurting the growth of stock exchanges since most of them have converted themselves into for-profit companies from ?associations of persons.? The recently completed corporatisation and demutualisation (C&D) process has failed to bring in enough competition among bourses and the restrictions on shareholding are proving to be a stumbling block in setting up of new stock exchanges.

A senior Sebi official said, ?We would like to take the final view by the end of the current calendar year. The instruction to the NSE to bring down the shareholding of its various stakeholders to the 5% level has been put in abeyance till a final view is taken.?

A part of the proposal was discussed at the Sebi board meeting held last week in Mumbai. The final view on the eligibility of the anchor investor will be taken by taking into account the various conflicts of interest that may arise.

The ministry of finance (MoF) had taken a view that foreign investment should be limited to 49% and had left the nitty-gritty to the regulator. Sebi, on its part, had put a cap of 5% on shareholding by both the institutions (including persons acting in concert) and individuals. It has also put restrictions on acquiring more than 1% shareholding in the exchange and had said the holding will be valid only after it is cleared by Sebi.

Sources said the new norms on shareholding can always come with the set of restrictions already prevailing. Sebi can always have the power to de-recognise a bourse in case the situation goes out of control. The exchanges may come and go (close down), but there should always be a feeling that there will always be enough exchanges to take care of investors? interest, the sources added.