Sebi says no to Jalan,yes to bourse listings

* Silent on segregating commercial and regulatory wings of exchanges

Rejecting many key proposals of the much-debated Bimal Jalan panel,the Securities and Exchange Board of India (SEBI) has allowed listing of stock exchanges,with several conditions,including limits on ownership so that 51 per cent of the exchange is held by the public. The regulator,however,remained silent on the issue of segregating commercial and regulatory wings of the exchanges as proposed by the Jalan panel.

The Sebi board which met on Monday cleared the listing proposal after considering the Jalan panel recommendations which had not favoured listing of exchanges. The stock exchanges will have diversified ownership and no single investor will be allowed to hold more than 5 per cent except the stock exchange,depository,insurance company,banking company or public financial institution which may hold up to 15 per cent, Sebi said.

The Jalan panel had suggested limiting the ownership of stock exchanges,allowing only 24 per cent of capital in depositories to be held by exchanges,key executives will not have any variable component in their remuneration,no listing of exchanges and that stock exchanges and other institutions should not be making money more than a few percentage points above the RBI bond rate. It also proposed the idea of capping profits.

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However,the Sebi okayed a variable pay component which should not exceed one-third of total pay. There was no word from the Sebi on capping profits.

Market sources said Sebi has not tackled the issue of conflict of interest by remaining silent on segregation of the commercial and regulatory arms of the exchanges. The heads of departments of Member Regulation will directly report to an independent committee of the board of the stock exchange as well as to MD/CEO (dual reporting),Sebi said. The long-term goal would however be to set up an independent SRO at an appropriate time in future and provide the seed fund for the same,Sebi said. In many countries,the commercial and regulatory arms of the exchanges are segregated to avoid conflict of interest after listing. The regulatory role should be handled by an independent body, market sources said.

Nod with riders

* The Bimal Jalan panel had not favoured listing of exchanges

* For listing,the minimum networth for clearing corporation (CC) and the depository will be Rs 300 crore and Rs 100 crore respectively

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* All existing CCs will be mandated to build up to the prescribed networth of Rs 300 crore over a period of 3 years

* In the case of CCs at least 51% holding will be held by bourses. No single exchange will hold more than 51% in any CC