In a major capital market reform, the government on Tuesday issued an ordinance that would bar brokers from managing bourses, ensure greater trade in small companies' shares and safeguard small investors' interests.

The ordinance would amend the Securities Contract (Regulations) Act and Depositories Act to pave the way for demutualisation and corporatisation of bourses to ensure their orderly development and functioning.

It would also align the provisions of these acts with the SEBI Act regarding penalties, appeal and procedures of compounding of offence.

In line with the UPA government's commitment in the Common Minimum Programme, the ordinance would strengthen governance and avoid conflict of interests in the bourses, an official release said, adding it is also expected to safeguard the interest of investors and bring about greater transparency and efficiency in stock exchanges.

The ordinance is aimed at an orderly development and functioning of capital market reflecting the true fundamentals.

The structural reforms of stock exchanges follows the strong recommendations of a Joint Parliamentary Committee that probed the share market scam of 2001.

The Finance Minister P Chidambaram had announced in the Budget that the government intended to create an appropriate trading platform for small and mid-cap companies.