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Sebi may be forced to accept NSE model

Janaki Krishnan

The Securities and Exchange Board of India seems to be buckling under pressure from the Union finance ministry and planning to give the go-ahead to the National Stock Exchange model for corporatisation of bourses.

As a first step towards this, the market regulator has announced that there would be no more Sebi nominees on the boards of stock exchanges.

The Union finance ministry and Sebi have been at loggerheads on the corporate structure of stock exchanges.

The ministry felt that the corporate structure of NSE should serve as a model for the corporatisation of stock exchanges where the ownership is vested with financial institutions and the management is free from broker control.

But Sebi felt that there must be brokers' representation on the board. The NSE board is made up of professionals and ownership and management is mutually exclusive for trading purposes. There is no Sebi nominee on the bourse's board.

In exchanges like the Bombay Stock Exchange membership and ownership were overlapping since brokers who were members were also the owners of the exchanges.

In fact, the BSE model of corporatisation, submitted to Sebi, also has brokers on the board. However, the finance ministry is learnt to be averse to brokers being on the board of exchanges and wants a total segregation in ownership, management and trading rights.

The Calcutta Stock Exchange will be the first exchange from where the Sebi nominee will step down. The market watchdog has explained that its decision to have no nominees on stock exchange boards was done with a view to avoid any vested interest in the affairs of the bourses which might render it culpable in any of the exchange's actions.

The existing nominees on other stock exchanges will soon be stepping down in accordance with the Sebi announcement, though no specific timeframe has been fixed.

Sebi has also made it clear that brokers cannot be office bearers and according to sources even board berths may not be ultimately available to them.

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