The Hindu Business Line : SEBI expert panel soon to study derivatives segment

Recommendation
The Primary Market Advisory Committee had recommended to the board that, for a period of six months, all IPOs should be graded in the interest of investors.

New Delhi, Feb. 17 The Board of the Securities and Exchange Board of India (SEBI) on Saturday deferred a decision on mandatory grading of initial public offers (IPOs) pending presentation of a credit rating agency's experiences on this issue.

"Factoring in whatever inputs of the rating agency that are relevant for decision making, the SEBI Board will make a final call on grading of IPOs and whether there ought to be any time limit as recommended by the Primary Market Advisory Committee (PMAC)," Mr M. Damodaran, SEBI Chairman, told newspersons here.

He said that "a credit rating agency" had sought an opportunity to make presentation before the Board on the experiences gained by it in IPO grading in the recent months.

"The SEBI Board discussed various aspects of the proposal (mandatory grading of IPOs) and decided to allow the rating agency to make a presentation at the next meeting of the Board, which is likely to be held in March," he said.

The PMAC, which already has representation of credit rating agencies, had recommended to the SEBI Board that, for a period of six months, all IPOs should be necessarily graded in the interest of investors.

At present, IPO grading by a rating agency is only optional. The PMAC had made a case for mandatory IPO grading to prevent companies of dubious nature from using the current market rally for raising funds.

Mr Damodaran also announced that a small committee of experts would be constituted to make a thorough study of various aspects of derivatives segment. Besides making policy related recommendations, the expert committee would also identify new products that ought to be introduced in Indian securities market having regard to present stage of development of derivatives segment.

Mr Damodaran also said that any decision on allowing delivery based settlement for `options' need not wait till the expert committee submitted its report.

The SEBI Board today also decided to frame regulations for investment advisors on a priority basis.

Mr Damodaran said that the Board did not have any discussions on short selling by institutions as its position on this matter was "fairly clear" and that there were certain other issues that need to be addressed. "These are being addressed by all concerned agencies not excluding SEBI," he said.

He added that there was no discussion about real estate mutual funds at the meeting. The SEBI Board was updated on the progress made in the implementation of the Patil Committee report on strengthening and deepening the corporate debt market.

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