Sebi unveils reforms; briefs board on NSE, NSEL : Less listing time, new norms for exchanges

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New Delhi | Published: February 12, 2017 7:19:28 AM

The Securities and Exchange Board of India (Sebi) on Saturday proposed reducing the time-gap between the initial public offer (IPO) and listing, allow institutional participation in commodity derivatives markets and listing of securitisation receipts issued by assets reconstruction companies.

Sebi unveils reforms; briefs board on NSE, NSEL Sebi unveils reforms; briefs board on NSE, NSEL

The Securities and Exchange Board of India (Sebi) on Saturday proposed reducing the time-gap between the initial public offer (IPO) and listing, allow institutional participation in commodity derivatives markets and listing of securitisation receipts issued by assets reconstruction companies.
The Sebi board meeting, which was probably the last for its outgoing chairman UK Sinha, also approved a consultative paper for comprehensive review of regulations for stock exchanges and clearing corporations. After six long years at the helm, Sinha will pass on the baton to Sebi chairman-designate Ajay Tyagi on March 1.

As per the plan of action for next year, Sebi has proposed to shorten the gap between an IPO and the listing of shares from the current six days (T+6). The move is aimed at curbing risks related to market volatility, which may emerge within that period. In several developed markets, the time between an IPO and listing of shares is as narrow as one day.

To promote competition and deepen the market, the Sebi would allow institutions like MFs and banks to participate in commodity derivatives markets in a phased manner. After the merger of the FMC with Sebi on September 28, 2015, the market regulator has taken several steps to ensure proper risk management and improved surveillance for the commodity markets.

Other proposals

Sebi to start talks with stakeholders on integration between commodity spot and derivatives markets
Designing a system of risk-based supervision for commodity brokers
Set up a Cyber Security Lab for securities market
Common application form for registration, opening of bank and demat accounts and issue of PAN for foreign portfolio investors
Setting up a facility for online registration of intermediaries

The fraud at the National Spot Exchange Limited (NSEL) prompted the government to merge the FMC with Sebi to improve regulatory oversight.
The plan of action for FY18 was discussed in the customary Sebi board meeting held in the capital after the Union Budget. The Sebi board meeting was apprised about the various ongoing issues pertaining to the capital market, including 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 R2.75 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% of total AUC in June 2007 to 6.7% in December 2016.

Following the FY18 Budget announcement to allow listing and trading of securitisation receipts issued by asset reconstruction companies (ARCs) on stock exchanges, the Sebi said it would implement the proposal. The proposed move would enhance capital flows into the securitisation industry and be particularly helpful to deal with bank non-performing assets (NPAs).

Addressing the meeting, finance minister Arun Jaitley said the regulator is evolving in accordance with the needs of the economy and markets.

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