The Securities and Exchange Board of India (Sebi) is currently reviewing the ownership structure of clearing corporations in order to ensure independence and effective risk management within the Indian market. This move comes as a response to the dominance of parent exchanges over clearing corporations, which may compromise their ability to operate independently.
Sebi has set up a committee led by Usha Thorat, former deputy governor of the Reserve Bank of India (RBI), to explore alternative ownership arrangements that would meet the capital requirements of clearing corporations and broaden the pool of eligible shareholders. Currently, clearing corporations such as Indian Clearing Corporation (ICCL) and NSE Clearing (NCL) are owned entirely by their parent exchanges, BSE and the National Stock Exchange.
One of the key concerns highlighted by Sebi is the influence that parent exchanges could exert on clearing corporations due to their ownership structure. By incorporating the financial statements of clearing corporations into their own consolidated financial statements, parent exchanges may prioritize their own interests over those of the clearing corporations.
In order to address these issues, the committee may consider revising the current ownership norms, which dictate that stock exchanges must hold a minimum of 51 percent of the equity share capital of clearing corporations. Additionally, restrictions on shareholdings by non-residents, individual shareholders, depositories, and other institutions may be reassessed to better accommodate the financial obligations and investment needs of clearing corporations.
Sebi emphasizes the importance of ensuring the independence of clearing corporations, particularly in light of the growing derivatives market and the increased risk this brings to the overall financial system. As derivatives trading becomes more prevalent, the resilience of clearing corporations becomes crucial in mitigating market stress and maintaining stability.
In conclusion, Sebi’s initiative to review the ownership structure of clearing corporations is aimed at safeguarding the integrity and independence of these entities in the Indian market. By exploring alternative ownership arrangements and addressing regulatory gaps, Sebi seeks to enhance the effectiveness of clearing corporations in managing risks and supporting a robust financial system.
