In addition to ownership diversification, Sebi has proposed that CCs operate as profit-making public utilities.
The Securities and Exchange Board of India (Sebi) has proposed diversifying the ownership structure of clearing corporations (CCs), which are currently wholly owned by stock exchanges. The regulator has suggested changes to ensure fair ownership distribution while minimizing disruption to the capital markets.
Under existing rules, CCs are not allowed to list publicly, unlike their parent stock exchanges. However, since CCs are wholly owned by stock exchanges, they are indirectly subjected to market pressures. Recognizing this issue, Sebi has outlined several approaches in a consultation paper to address ownership structures in a way that ensures fairness for all stakeholders.
One proposal involves distributing 49 percent of the CCs' shareholding to the shareholders of the parent stock exchange on a proportional basis. The remaining 51 percent would initially stay with the parent exchange. Over the next five years, the parent exchange would reduce its holding to 15 percent or lower by selling shares to other exchanges. This approach would ensure that CCs remain majority-owned by exchanges in line with Sebi’s Stock Exchange and Clearing Corporation (SECC) norms.
An alternative proposal recommends transferring the entire shareholding of a CC to the existing shareholders of the parent exchange. These shareholders would then have the freedom to trade their shares in the CC independently. This method would completely separate the CC from its parent exchange, creating an independent entity while ensuring fairness for the shareholders of the parent exchange.
Sebi has emphasized that CCs will remain prohibited from public listing, regardless of the ownership restructuring approach adopted.
According to Jyoti Prakash Gadia, Managing Director of Resurgent India, these proposals reflect the need for CCs to operate independently and free from any conflict of interest or bias toward their parent stock exchanges. He noted that as capital markets expand rapidly, it is essential for CCs to function without undue influence and ensure a level playing field.
In addition to ownership diversification, Sebi has proposed that CCs operate as profit-making public utilities. This would require reinvesting profits into technology, infrastructure, and risk management systems to enhance efficiency and stability. Furthermore, CCs should maintain reasonable fee structures to avoid imposing additional costs on investors.
Sebi has also suggested encouraging the creation of multi-asset CCs while maintaining a system of multiple clearing corporations. This diversification is aimed at reducing dependency on a single CC and improving systemic resilience.
To gather industry feedback, Sebi has invited public comments on the proposed reforms, with a deadline of December 13.
These measures reflect Sebi’s efforts to enhance the independence, efficiency, and resilience of clearing corporations, which play a critical role in the stability of India’s capital markets.
(This article is a reworked version of a PTI feed.)