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Our Bureau

Mumbai, Sept. 5 SEBI has proposed an increase in the shareholding limit in Indian stock exchanges for certain categories of investors to 15 per cent each, against the current limit of 5 per cent.

The revision has been proposed for investor entities such as stock exchanges, depositories, clearing corporations, banks and insurance companies, a SEBI discussion paper issued on Friday said.

The modification is in view of the difficulties expressed by some shareholders of the NSE and OTCEI in bringing down their stake to the prescribed 5 per cent, said market watchers.

A year ago, SEBI had directed these entities to reduce their stake to at least 5 per cent by October, which is just a month away. These shareholders were finding it difficult to offload their excess stake, as there were problems in price discovery and finding eligible buyers.

The regulator has also received representations from certain entities that felt the 5 per cent limit did not allow them to play a constructive role in the stock exchanges.

“The 5 per cent limit is acting as a deterrent in attracting long-term strategic investors in stock exchanges, the shareholding was too small to encourage them to take sufficient interest in the growth of the exchange,” SEBI said citing a representation it had received.

SEBI will receive comments and suggestions on the above proposal until September 19.

According to the Securities Contracts Regulations 2006, institutions cannot hold more than five per cent stake in a recognised stock exchange.

Also foreign investor holding in stock exchanges is restricted to five per cent, under the Government policy on foreign investments in infrastructure companies in the securities markets, according to SEBI and RBI circulars issued in December 2006. SEBI’s proposal provides a breather to Stock Holding Corporation of India (SHCIL) and others holding more than five per cent stake in the NSE.

SHCIL was willing to sell its excess stake in the NSE, but only at price, which was equal to or higher than Rs 3,500 a share, the same price that was offered to LIC when it offloaded its stake of more than five per cent in the NSE in April.

If the SEBI proposal is endorsed and the 15 per cent holding allowed, some of the existing stakeholders might even be able to completely exit at a robust price since a larger stake in stock exchanges would attract more buyers too, said a market participant.

More Stories on : Stock Exchanges | Regulatory Bodies & Rulings

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