Capital market regulator Sebi plans to set up an independent SRO (self-regulatory organisation) for stock exchanges, but wants day-to-day trading regulations and surveillance actions to remain with the bourses themselves.
Under the existing regulatory framework in India, the stock exchanges act as the front-line regulators for the market and the Sebi (Securities and Exchange Board of India) is the ultimate oversight and regulatory authority.
After putting in some efforts to effect a major overhaul last month in the way stock exchanges are run and owned, Sebi is now looking at ways to minimise any possible conflict of interest in the regulatory and business interests of bourses.
As per new rules, exchanges can also get listed, although not on their own platform.
Sources said Sebi feels that an independent SRO could be set up to take over member regulation functions of stock exchanges in the long run, but trading regulations and surveillance actions should remain with bourses.
However, a dual-reporting structure could be introduced for the regulatory department of stock exchanges for now to tackle any conflict of interest. The head of regulatory department would report to the MD or CEO of the bourse as well as to an independent committee of the exchange's board.
The Sebi board has already approved a proposal for providing the seed fund for setting up the SRO, whenever deemed appropriate.
In listing of companies, Sebi would continue to prescribe minimum standards, but exchanges can put in place additional measures. The heads of listing department would also have a similar dual reporting.