Monday, October 6, 2008

SEBI Board meeting of 6th October: Important Decisions

In a meeting earlier today, the SEBI Board took several decisions which may have an important impact.


1. The Board decided to encourage promotion of dedicated exchanges/platforms for trading of securities for small and medium enterprises. Enterprises with a post issue paid up capital of less that Rs. 25 crore would be listed on such exchanges/platforms.


2. In a move which may have important implications, the Board stated, "Currently a person, along with persons acting in concert, can hold up to 5% of shares in a recognized stock exchange. In order to encourage competition in the exchange space, the Board decided to enhance this limit from 5% to 15% in
respect of six categories of shareholders, namely, public financial institutions, stock exchanges, depositories, clearing corporations, banks and insurance companies.
"



3. The Board decided to review the framework governing foreign institutional investors. Among other things, it “… undertook a limited review of the FII regime in respect of overseas derivative instruments, popularly known as PNs. This review was due in terms of the decision that was taken along with the decision taken in October 2007. It decided to do away with restrictions on issue of PNs by FIIs against securities, including derivatives, as underlying.



The SEBI release is available here. The implications of this decision are analysed by Mr. Sandeep Parekh, former Executive Director SEBI and currently a visiting faculty at IIM Ahmedabad on his blog linked here. A Business Standard Report is available here.

3 comments:

Shantanu Naravane said...

Just came across Mr. Bhave's interview to Business Standard, which I found of some interest, available at http://www.businessstandard.com/india/storypage.php?autono=336554. There also seems to be the impression that the move won't affect market reactions too much. See http://www.businessstandard.com/india/storypage.php?autono=336552

Manan said...

It will be interesting to see the form and shape this alternate market would take and whether it would be modelled on junior unregulated markets in some european jurisdictions. SEBI will have to deal with numerous issues beginning with whether it is appropriate for retail investors to be able to participate in this segment or will it be more efficient for this market to be institutions-only.

Manan said...

It will be interesting to see the form and shape this alternate market would take and whether it would be modelled on junior unregulated markets in some european jurisdictions. SEBI will have to deal with numerous issues beginning with whether it is appropriate for retail investors to be able to participate in this segment or will it be more efficient for this market to be institutions-only.