NSE says stakeholders seeking a listing roadmap

Equity stakeholders of the National Stock Exchange (NSE), India’s biggest, are looking for clarity on the conditions under which listing could eventually take place, said Ravi Narain, managing director and chief executive officer and Chitra Ramakrishna, joint managing director, during an interaction with DNA last Thursday.

“Our shareholders have told us that they are not looking for immediate listing as long as there is a clear roadmap for listing. They recognise that regulation and business cannot easily co-exist and that regulation will have to be taken out before listing takes place,” Ravi Narain said.

The comment assumes significance as it seems to suggest that investors in the NSE would be appeased as long as they are given a clear indication of when stock exchanges could segregate regulation and then list.

This comes on the back of widespread protests by shareholders in exchanges including those of the NSE, over what was seen as the sudden loss of an exit option after the Jalan Committee opposed their listing over potential conflicts of interest involving their commercial and regulatory objectives.

In a subsequent interaction, Jalan clarified listing is not completely off the table and said that the final decision rests with the regulator.

Among the criticism of the committee’s suggestions was a view that exchanges which regulate themselves poorly will eventually lose out or blow up and electronic surveillance cuts down the risk of wrongdoing going undetected.

It was also said that ownership of exchanges should be allowed since even banks are listed even though they can pose a bigger contagion risk than exchanges.

These points remain open to debate, said the NSE duo.
The collateral damage associated with a blow-up would affect retail investors as well as the development of the market overall.

“The protection of the retail investor has been a guiding principle enshrined in the securities regulation in India. One needs to keep this in mind while deciding on the issue,” said Chitra Ramakrishna.

Similarly, while sophisticated electronic surveillance is of help to regulators in addressing cases of market abuse, electronic tools provide a whole new range of weaponry to the wrongdoers as well for introducing newer ways of market abuse, said Ravi Narain.
Comparisons with banks which are said to pose a large contagion risk are not justified since banks do not regulate any intermediaries in the banking industry, he said.

The NSE top management also talked of the issue of supernormal profits in relation to the cost of trading for the investor.

“Only 1% of the cost to the investor comes from the exchange’s transaction charges while 55% comes from government-related and statutory taxes and 45% from brokerage fees and depository participant charges,” said Ravi Narain.