Bimal Jalan says he’s open to stock exchanges listing

Bimal Jalan said that he remains “open to listing” of stock exchanges, during a meeting with the management of India’s three major exchanges — the National Stock Exchange (NSE), the Bombay Stock Exchange and MCX Stock Exchange — apart from other stake holders on Tuesday.

The final decision on the matter would rest with the Securities and Exchange Board of India, he said, according to officials present at the meeting.

The views expressed by the former governor of the Reserve Bank of India is in contrast with the report submitted to Sebi by a committee headed by Jalan on November 22.

The report had said that listing of exchanges should not be allowed since this could give rise to conflict of interest in monitoring its own listing related compliances or that of related or competing entities.
Listing may result in the institution becoming a vehicle for speculative investments, the report said. Also any downward movement in its share price could result in a loss of credibility which could affect the market as a whole.
“Therefore, the committee is not in favour of permitting listing,” it said.

The remark by the committee chairman has not resulted in cheer in the exchange camps yet.

“We walked away with a sense of disappointment. He said that the report reflects the balanced view of the committee and now it is up to the regulator to decide,” said one person who was in Delhi at that time.

“He has merely expressed his sentiment. The impression is that listing may not be viable now but could be reviewed five years hence,” said a person from another organisation.

The Jalan report had reccommended that the regulator review the situation in five years after the suggestion made by the committee is implemented.

“We feel that the report of the committee could have left the decision to the regulator if there was a different point of view on listing, instead of being categorical in its denial” said Joseph Massey, managing director and chief executive officer at MCX.

The NSE suggested that the conflict of interest inherent in an exchange’s commercial and regulatory role is at the core of the report and all the issues including listing needs to be addressed in this light.

“We need to see what is the road map, what are the pros and cons , should the regulatory role be with a State regulator or an SRO (self-regulatory organisation),” said Ravi Narain, MD and CEO of NSE.

“...if it is said that people stop trusting an unreliable exchange, the problem is not only that the institution, an exchange, a bank or an insurance company goes down, the problem is that it sets the entire market back by 10 to 15 years. When the Harshad Mehta scam happened, only exchanges didn’t get affected. Our capability to raise capital was severely dented,” he said.