Sebi, India’s market watchdog, has suggested modifications to the stock exchange-owned clearing businesses in order to diversify their ownership. Within five years, Sebi proposes to reduce exchange ownership to 15% by allocating shares to current exchange shareholders. The objective is to improve market resiliency and guarantee that clearing corporations function autonomously.
On Friday, market watchdog Sebi suggested expanding and diversifying the ownership of clearing businesses, which are currently stock exchanges’ wholly-owned subsidiaries. Clearing corporations (CCs) are indirectly subject to market pressures because Sebi regulations forbid CCs from publicly listing but permit stock exchanges, which are their parent companies, to do so.
What does this mean?
Indian stock exchanges now own a controlling ownership of at least 51 percent in clearing businesses, which are essential for trading settlements. In order to diversify ownership, SEBI suggests two options: either keeping the exchanges’ majority interest at first and then reducing it to 15%, or permitting full ownership transfer to shareholders while regulatory adjustments are being made. With sustainable fee models, these changes seek to maintain corporations’ financial independence while improving operational independence.
To avoid conflicts of interest and preserve market stability, SEBI, however, prefers clearing entities to stay unlisted. Before final choices are taken, stakeholders are requested to engage in a consultation period that runs until December 13, 2024.
Additionally, Sebi has suggested adjustments to CCs’ profit and dividend distribution. Nonetheless, it has insisted that CCs would not be permitted to list on exchanges, upholding the present standard that limits their listing. Additionally, the regulator has pushed for CC consolidation.
