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Pending litigations, governance, technology issues, and the diversification of clearing corporations are holding up NSE’s initial public offering (IPO), said SEBI chairman Tuhin Kanta Pandey at the Mint Investor Summit on Saturday.
“Before it goes public, it (NSE) will need to be cleared from different angles. Some issues have already been identified,” Pandey said, pointing out that NSE is a systemically important and overwhelming institute. “Pending litigations is one concern. Governance lapses and technology issues are another. Additionally, there is the proposal regarding the diversification of clearing corporations,” he said.
NSE and SEBI have been in discussions through some letters, which are being examined and taken forward by the capital markets regulator, he said.
This comes at a time when reportedly NSE has seeked a No objection Certificate (NOC) from SEBI again to be able to proceed with the listing of its shares. The exchange has also responded to the regulator’s queries regarding governance, technology, and other issues highlighted above in its letter seeking the NOC.
“Market intermediaries, who handle assets for the investors, must have faith that they will have equal access to the markets, price discovery will be fair and market abuse will be curbed, “ Pandey said, pointing out that ensuring market integrity is one of SEBI’s fundamental principles.
Any lack of confidence among investors regarding the safety of their assets and transparency of information will move them towards unregulated markets, he said.
Optimum regulation
The SEBI chairman also said that they are moving towards achieving optimum regulation over maximum regulation, taking into account the costs involved. If regulations increase the cost of business, they will eventually be passed on to investors, he said.
“Going forward, we will be looking to review regulations, weed out those which are outdated and rationalize those which may be necessary. This will be consistent with our objective of achieving optimum regulation and creating ease of doing business by reducing compliance burden and the cost of regulation,” Pandey said.
For example, SEBI’s high entry barriers and tough regulations have limited the number of registered investment advisors (RIAs) in comparison to the country’s size. Although the regulator recently rationalised RIA regulations to tackle this problem, the current rules still make it difficult for them to operate daily and there is scope for these barriers to be lowered, Pandey said.
“Sometimes, we come across some egregious behavior and if we react to them vehemently in terms of regulations, we end up making regulations much tougher than they ought to be. This balancing is something we need to achieve in every regulation,” he said.
Nuanced F&O tightening
Further, with regards to the futures and options market regulations, the SEBI chief said that the regulator cannot have a “sledgehammer” approach by imposing any threshold-based curbs on retail investors, and requires nuanced and technical regulations.
“F&O itself is a complex market. We cannot have a sledgehammer or a blunt approach; we need a surgeon’s knife. We need to know exactly how otherwise innovations will be lost,” said Pandey.
