With senior IAS officer Ajay Tyagi taking charge as the chairman of Securities and Exchange Board of India (Sebi) today, he needs to immediately take a call on five key issues. These includes finalising the National Stock Exchange (NSEs) co-location matter and bringing some key regulatory changes in the commodity market. Tyagi, 58 should also give emphasis on corporate governance issues especially safeguarding the interest of minority shareholders which has been a concern for quite some time.
Let's look at some of the key areas he needs to primarily focus on.
Corporate governance- The recent high-profile board room battle has triggered the need for transparency and ensuring that interest of minority shareholders is safeguarded. Sources said that regulator may soon come out with the detailed guidance note after considering market participants opinion on overhauling of the way listed firms discharge their duties.
NSE' co-location issue and new set of rules for high-frequency trade (HFT): Sebi to finalise the action on NSE's co-location matter over alleged unfair trade practices which also triggered the need for tougher rule against high-frequency traders. Sebi is yet to set regulations on algorithm trading or HFT trades. It had issued the draft paper on August 5, 2016 and sought public comments, but it is yet to come out with the final guidelines.
Start-up listing/Reits launch: To address the capital raising needs of new-age technology companies, Sebi introduced a separate listing platform meant for startups. The norms for listing on these platforms were much relaxed compared to those on the main exchanges. However, despite a lot of effort and groundwork from Sebi, the concept failed to take off in a meaningful way. Similarly, other new instruments such as municipal bonds, real estate investment trusts (Reits) and infrastructure investment trusts (InViTs) also haven’t made much headway.
Self trading of exchanges: At present, Sebi’s regulations don’t allow exchanges self-listing and self-trading. The market regulator has taken a firm stand on not allowing self-listing. However, both BSE and NSE has requested Sebi to allow them to trade on its own platform under the permitted-to-trade mechanism. Sebi is believed to have been studying the risks in allowing self-trading.
Commodity market development: To shore up confidence in commodity space, Tyagi needs to also come up with new set of rules for the commodity market especially allowing more participants in the spot commodity market and sorting the legal hurdles in option trading. These will also be among his top priority after National Spot Exchange (NSEL) crisis which has spooked the entire commodity space.