The recent proposal of market regulator SEBI to liberalise ownership norms for stock exchanges has raised a pertinent question. Was the Bimal Jalan committee that was set up to suggest the same norms a decade ago, a massive failure? The answer has to be a resounding ‘yes’.

Forget the birth of any new exchange for the past 10 years, the Jalan panel’s draconian rules killed 17 bourses in India including 15 regional exchanges. Ideas floated by the Jalan committee and overwhelmingly approved by SEBI, paralysed a newcomer MCX-SX as it was left high and dry for investments, talent and technology.

In just weeks of its launch, the MCX-SX stole a march over its established rivals BSE and the National Stock Exchange (NSE).

Yet, the London Stock Exchange, NYSE, Deutsche Borse, Singapore Stock Exchange and investors such as George Soros and Thomas Caldwell, all of whom had either invested or made big plans for India’s exchange segment, were on their way out.

Jalan, a former RBI governor, suggested a cap on the ownership of exchanges to the extent that it made no business sense. Individual exchange promoters had to cut their stake to a ‘measly 5 per cent’ in three years from launch.

MCX-SX was asked by SEBI to cut promoter holding by 26 per cent before it got equity trading licence. Only select foreign institutions were allowed 15 per cent stake in exchanges. Jalan vaguely said that exchanges should not make ‘supernormal profits’ but never defined what it meant.

At least now, ahead of the NSE’s initial public offer, SEBI is thinking liberally. It wants 100 per cent ownership in exchanges for domestic promoters and 49 per cent for foreigners.

SEBI has also proposed 10-year time period for promoters to cut their stake to 51 per cent or 26 per cent in new exchanges and invited public comments.

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