The Hindu Business Line : Self-listing: SEBI looking at `conflict of interests'

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Mumbai Feb. 3 Capital markets regulator SEBI is examining ways to address the `conflict of interests' that occurs when a stock exchange goes for self-listing.

The issue has come up as the Bombay Stock Exchange Ltd, the country's premier exchange, is planning to go in for a public issue and listing of its shares.

The BSE, which got corporatised recently, is expected to dilute its members' equity to 49 per cent by May this year. The exchange is currently weighing options, including strategic sale of part of its equity and a subsequent IPO.

The issues related to `self-listing'— listing of shares of a stock exchange on the same exchange — were discussed at a joint meeting of SEBI's primary and secondary market advisory committees on Friday.

Conflict of interest would arise when the corporate entity (the stock exchange itself) is listed on the same exchange. There could be conflict of interest when the regulator itself has a stake in the regulated. (A stock exchange, considered to be the primary regulator for stock trading, is responsible for keeping up the integrity of the market).

Compliance suggestions

One suggestion was that a SEBI-appointed committee should monitor compliance of listing norms by the exchange when it is listed, and also the subsequent trading of its shares.

Regulators in some countries where stock exchanges are listed on the same exchange follow this system. International exchanges such as the New York Stock Exchange, Nasdaq and the London Stock Exchange are themselves listed on their own exchanges.

Another question is whether to make cross listing — listing a stock exchange on other exchanges — mandatory for stock exchanges.

In the case of the BSE, this means listing its shares on rival NSE or any other exchange. Those who support cross listing argue that it will provide an automatic monitoring system.

A member of the SEBI advisory committee, who attended the joint meeting, said that from the corporate governance point of view, it would be advisable to list the exchange in as many exchanges as possible, but it may not be desirable to make it mandatory.

The exchange as an entity should have the freedom to list its shares on any exchange, he said.

An internal group of SEBI will now study the views emerging from the joint committee meeting.

On the basis of the group's recommendations, the regulator would issue guidelines on listing of shares of stock exchanges, said a SEBI official.

An analyst said the issue would not have come up if there were a centralised listing authority for stock exchanges, as proposed earlier.

Meanwhile, the BSE is understood to be scouting for strategic partners overseas for divesting 26 per cent stake. As per SEBI rules, foreign equity is allowed up to 26 per cent in Indian bourses with 5 per cent cap for a single entity.

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