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BSE's corporatisation proposal hangs fire

Sangita Shah & Rakesh P Sharma

The Securities and Exchange Board of India has not yet taken a final view on the corporatisation proposal of the Bombay Stock Exchange.

According to sources, apart from the BSE, which had submitted the proposal more than one-and-a-half month back, no other exchange has submitted any similar proposal to the markets regulator.

Sources said that Sebi is in a dilemma over the fate of the governing board of BSE. The nine elected broker members of the total 19 were restrained to continue on the board after the price slump which gripped the markets a day after the Union budget was presented on February 27.

The nine elected broker nominees were restrained to act as directors' on the board after the then BSE president Anand Rathi was accused of seeking confidential trade information from the surveillance department of the exchange.

An inquiry was initiated by Sebi and later a 30-member JPC set up to probe the market crash. The board continues to meet every fortnight with half the actual strength for the last seven months.

Though the day to day functioning of BSE is being managed by professionals, all strategic and developmental decisions are implemented only after prior approval of the governing board, which constrains the timely decision making process. Moreover, the prevailing environmental scenario has kept the functional directors quite cautious, sources said.

Meanwhile, Sebi is believed to be weighing various options regarding the composition of the BSE governing board and the decision may come only after tax exemption laws are passed by the government.

BSE which is planning to corporatise and demutualise based on the Nasdaq model is keen on the early implementation of corporatisation.

However it is being felt out that the process of corporatisation might take another 2-3 years. Corporatisation at the London Stock Exchange took close to 10 years. "How can we expect a similar restructuring to happen in our country overnight," opines a first-generation BSE member.

Further, given the focus of the authorities concerned on various inquiries, the corporatisation and demutualisation of the stock exchanges will be further delayed, feel market sources.

A section of BSE members are also lobbying for reinstating the broker directors on the governing board because the accusation against former broker directors for leaking out the information has not been proved.

Alternatively Sebi should bring in a new structure without any delay in the larger interest of capital markets. It should not prolong the confusion and speculation about the fate of the board any longer, said a top BSE official.

The 19-member BSE board comprises three nominees each from the Sebi and Reserve Bank of India, three public representatives, nine elected broker directors and the executive director of the exchange.

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