SEBI Chairman Tuhin Kanta Pandey said on Saturday that India’s existing exchange infrastructure is sufficient to handle larger volumes. He noted that location-based exchanges are difficult to operate now because everything is electronically connected. The Calcutta Stock Exchange must meet strict financial and technical conditions before it can restart operations.
SEBI Chairman Tuhin Kanta Pandey on Saturday said India’s existing exchange infrastructure is “sufficient” to handle larger volumes. Pandey emphasised that it is now difficult for location-based exchanges to operate, as location is now much less relevant because everything has to be electronically connected.
“I think even the existing exchange infrastructure is sufficient to handle larger volumes also,” Pandey replied to a question from the media about whether the country needs more exchanges, regional or national.
To a set of questions related to the proposed revival of the century-old Calcutta Stock Exchange (CSE), he said the bourse needs to meet conditions such as a net worth of ₹100 crore and an average annual turnover of ₹1000 crore, infrastructure for orderly execution of trades, an online screen-based trading system, an online surveillance capability and cyber security controls, among others.
The SEBI Chief said CSE will have to settle outstanding broker dues and establish a separate clearing corporation or tie up with trading corporations for settlement of trade before restarting its operations, as trading has remained frozen since 2013. Also, a business plan has to be there.
Understanding market
“All these conditions are there which need to be met. You need to understand that a market infrastructure institution is one of the most important institutions for market integrity. Today the systems are extremely high-tech. You have to invest a lot in technology. So, any investment of that order obviously will require that the money be recovered in the business plan,” Pandey said, adding an exchange will need to generate sufficient turnover.
“Now, the turnover will depend upon people who volunteer to come and trade (on the exchange). Traders will want liquidity, because if you do not have adequate liquidity, then your impact cost will be very high. So, it is a catch-22 situation,” he pointed out.
Calcutta Stock Exchange
Notably, the West Bengal government has proposed to support the revival of the 118-year-old Calcutta Stock Exchange, which is on the verge of closure due to several hurdles, to reclaim Kolkata’s place as a financial capital.
“It is difficult for location-based exchanges. Location is now much less relevant today because everything has to be electronically connected. You not only trade within the country; there are traders who are trading from outside the country. So, in a way, new technologies have made the location much less relevant than earlier when they used to be physical trades,” the SEBI Chairperson said during the media interaction in Kolkata.
He said the capital market regulator is likely to issue the proposed consultation paper within weeks on compliance requirements for foreign portfolio investors (FPIs).
Fundraising processes
Earlier, in a Bharat Chamber of Commerce event, Pandey said SEBI has taken several steps to make fundraising processes simpler and more efficient as businesses seeking access to capital, time, cost and regulatory certainty matter.
“We have streamlined IPO processes and shortened timelines for rights issues. Listing requirements have been rationalised for large issuers. We have also addressed practical concerns of founders by permitting them, subject to prescribed conditions, to retain certain employee stock options after listing,” he said.
Pandey informed that SEBI is exploring the creation of a capacity-building network for independent directors.
“We feel that capacity development of independent directors is an important issue we should deal with. So, we are working now, and very soon we will have a wider consultation on that. Tentatively, we have an idea to develop a capacity-building network for independent directors, where all the important institutions, professional bodies, academia, and chambers and industry come together,” he said.
To a question, Pandey said SEBI is monitoring the developments at the leadership and governance differences between Tata Sons and Tata Trusts.
“At the holding company level, there are some issues, as that’s not really a listed company. The rest of the companies, those which are listed, follow all the LODR (Listing Obligations and Disclosure Requirements) norms,” he added.