Capital Markets Regulator SEBI notified Norms for Listing of Stock Exchange

Capital markets regulator Securities and Exchange Board of India (SEBI) on 21 June 2012 notified new rules for ownership and governance of stock exchanges to encourage the setting up of new bourses and enable exchanges to get listed. The amendments were announced following the legal tussle between the regulator and MCX Stock Exchange, which had earlier sought approval to start an equity platform.

The new norms require the recognised stock exchange to have a minimum net worth of Rs 100 crore at all times and at least 51 per cent of stake has to be held by public.
The ownership of a single investor was capped at 5% with an exemption for stock exchanges, depositories, insurance and banking companies and public financial institutions, which has been permitted to hold up to 15 per cent.  The shareholders who hold stake in excess of the new limits would have to comply with new norms within a period to be decided by SEBI and such period could be of up to three years.

SEBI also specified that direct and indirect exposure to any stock exchange will be considered while calculating the prescribed shareholding limit. The new rules permits stock exchanges to list on any recognised stock exchange other than itself and its associated stock exchanges, within three years of commencing operations.
It was highlighted that for a stock exchange that is not listed, an FII may acquire shares through transactions outside of a recognised stock exchange provided it is not an initial allotment of shares. For listed bourses, the FIIs can transact through the exchange where the shares are listed. The market regulator had earlier in April 2012 approved changes to the Manner of Increasing and Maintaining Public Shareholding (MIMPS) in recognised stock exchanges at a board meeting.

SEBI is currently in the process of formulating minimum listing standards for listing of companies on stock exchanges. A Conflicts Resolution Committee or CRC will be formed by SEBI with a majority of external and independent members to deal with all issues concerning conflicts of interest with respect to listing of companies. The CRC will first consider matters of policy and guidelines involving conflict issues and then recommend standards relevant to the areas of potential conflict in exchanges.

With respect to listing the market regulator mentioned that a recognised stock exchange may apply for listing of its securities on any bourse other than itself and its associated stock exchange, provided they comply with the new regulations of ownership and governance and also has completed three years of continuous trading operations and has got SEBI’s approval. The shares of a recognised stock exchange and a recognised clearing corporation is required to be in demat form, while clearing corporation cannot hold any right, stake or interest in an exchange.