In a move that could make it difficult for corporate entities to set up stock exchanges, a Sebi committee on Tuesday recommended that only banks and public financial institutions could be anchor investors in bourses and stopping them from listing or making huge profits.
According to industry sources, the recommendations would make things difficult for FTIL group-founded new bourse MCX-SX, which is allowed to trade only in currency futures, and its plea for trading in equity and other segments has already been rejected by Sebi on non-compliance with shareholding and other norms.
In the report posted for public comments on Sebi website on Tuesday, the committee suggested a minimum net worth of Rs 100 crore for the stock exchanges and allowing only banks and public financial institutions as the anchor or main investors.
These anchor investors would need to be identified in the application itself by any entity seeking permission.
For anchor investors also, the committee has suggested a minimum Rs 1,000 crore net worth.
The committee also suggested disallowing the stock exchanges to list themselves, although it recognised the benefits of listing in terms of providing investors an exit route.
But the disclosures and corporate governance requirements of the listing agreement would still be applicable on the bourses.
Sources said that no-listing recommendations could dampen the sentiments of entrepreneurs willing to set up bourses, as business entities would seek to realise the returns on their investments. Besides, the retail investors would not be able to reap any benefits in the absence of listing.
On the profits also, the committee suggested that the stock exchanges should be allowed to make only "reasonable" profits, although it stopped short of recommending any clear-cut cap on profitability and left it for Sebi to monitor and act against any super-profits that are made.
The high profits of larger bourse NSE has been a subject matter of sharp criticism by the newer entrant MCX-SX, which is currently allowed to trade only in currency futures.
Sebi rejected MCX-SX's plea to trade in equity and other segments on grounds including the bourse' shareholding structure not being in line with the current regulations. Sebi had said that MCX-SX did not meet the rule of a single shareholder holding a maximum 5%, as it considered MCX and Financial Technologies India Ltd (FTIL), the two erstwhile promoters, as Persons Acting in Concert (PAC) entities.
Sebi has also been charged by MCX-SX with promoting NSE's monopoly.
While the Sebi committee admitted that there was need for more competition and avoid any monopoly, it said that the competition could also drive average-pricing below the long run average costs and force one or more firms out of market.
"The eventual outcome may thus be competitively inefficient, as the continuing exit of firms may result in a monopoly," it said.