Sebi proposes compliance standards for index providers to increase transparency

The Securities and Exchange Board of India (Sebi) has proposed compliance standards for index providers in an attempt to increase transparency and promote reliability of benchmark determinations.

“It is proposed to prescribe a set of compliance standards for index providers in order to ensure quality and integrity of the indices administered, maintained or calculated by the index providers,” Sebi said in a discussion on Friday.

The regulator has proposed that in respect of indices based on which any product including derivatives, exchange traded funds and market linked debentures are traded on stock exchanges, they must ensure that the index provider is compliant with principles for financial benchmarks set out by International Organization for Securities Commissions (IOSCO), both on initial and continuous basis.

Sebi said the index provider should get
the IOSCO compliance certification from an independent third party, once in two years and the same should be available on its website.

At present , the calculation method and weightages for Nifty 50 and S&P BSE Sensex 30 is calculated based on free- float market capitalisation.

Both the indices are reviewed semi- annually. The changes for Nifty 50 come into effect in March and September, while for S&P BSE Sensex 30, the changes come into effect in June and December.

The regulator has sought public comments by January 7,2021.