The Hindu Business Line : IndoNext proposal likely to be cleared by BSE soon

THE board of Bombay Stock Exchange is likely to approve the draft proposal of IndoNext trading platform by month-end and pass it on to the market regulator, the Securities Exchange Board of India (SEBI), for final approval.

The Federation of Indian Stock Exchanges (FISE) has already given the go-ahead to the proposal in last Saturday's meeting, said its recently-elected Chairman, Mr Ramu Sharma. However, he did not detail the expected time line for SEBI approval.

Twenty-one regional stock exchanges that include Chennai, Bangalore, Kochi, Coimbatore and Mangalore stock exchanges plan to join hands to float a new trading system in line with EuroNext in a bid to survive the trade-less sessions environment due to the short-sell ban.

The move to form IndoNext is in line with the recommendations of the Kania Committee, set up by SEBI two years ago. IndoNext is expected to provide a common trading platform to about 2,260 scrips, which are to be classified in the BSE as `S' category.

BSE will shift all the scrips of companies with a capital base of Rs 20 crore to IndoNext. It is expected that mid-cap shares are likely to get a better valuation on the IndoNext as a common settlement (T+2) would be rolled out.

An estimated 4,000-odd companies are expected to be part of the IndoNext after screening out the defaulters. The shares of small and medium-cap companies listed on various regional stock exchanges (RSEs) do not have liquidity, making it difficult for investors to find the exit route. BSE and RSE members would be able to participate in trading in this market, operations of which would be managed by BSE. IndoNext is also likely to help smaller players raise money through listing on the common regional platform.

Sharing common platform envisages placing all the shares listed exclusively on the regional stock exchanges on a common order book, which would facilitate trading in shares of all participating exchanges. This would in turn entail increase of shares traded and also increase the number of players in this segment, says the release.

The participants have also proposed that members of the NSE and the BSE could be permitted to trade in IndoNext through limited trading rights, which could be formed at a low entry price.

"We have also sought a change in nomenclature of sub-broker for regional exchange players," Mr Sharma said. "We are open to capital adequacy entry norm and stricter entry norms," if the SEBI seeks to put in a stringent regulation for operators on the IndoNext, Mr Sharma added. "Investors' interest has to be safeguarded first," he said.