Ordinance promulgated for corporatisation of SEs

By Our Economy Bureau | 13 Oct 2004

New Delhi: The government has promulgated an ordinance to provide for compulsory corporatisation and demutualisation of stock exchanges to strengthen their governance structures and avoid conflict of interest in the present mutual stock exchanges.

The ordinance, which has amended the Securities Contracts (Regulation) Act, 1956 for this purpose, requires stock exchanges that are not already demutualised to do so within a given timeframe and under a scheme approved by the Securities and Exchange Board of India (SEBI).

Besides restricting the participation of brokers on the governing board of stock exchanges and reducing their shareholding, the ordinance also seeks to make the right to trade in a stock exchange distinct from the ownership and management.

The ordinance has also amended the Depositories Act and SCRA to ensure that the provisions of these two legislations are aligned with the amended SEBI Act 2002 in matters such as penalty, appeal procedure, compounding of offences etc.

Further, the ordinance has also amended the SCRA to provide a legal framework for creation of an appropriate trading platform for small and mid-cap companies. The trading platform would be under the regulatory supervision of SEBI.