NSE okay with cross listing if all disclosures go to Sebi

The National Stock Exchange (NSE) is fine with listing on the rival BSE exchange if all mandatory disclosures can be directly sent to either the Securities and Exchange Board of India ( Sebi) or another regulatory body.

“We can be listed anywhere but disclosure should happen to the regulator or a neutral body,” sources in

NSE told Business Standard.

While BSE has said it is fine with cross- listing and providing compliancerelated details to NSE, the latter wants to list on its own platform.

However, Sebi norms don’t allow a stock exchange to list on its own platform.

“Any entity or stock exchange will be comfortable if regulated or supervised by a competent regulatory authority rather than by another exchange. The same logic holds true for NSE,” the sources said.

Last month, Sebi issued a notification amending the Stock Exchanges and Clearing Corporations Regulations, making it easier for exchanges to list. The regulator, however, did not allow self- listing. “ A recognised stock exchange may apply for listing of its securities on any recognised stock exchange, other than itself and its associated stock exchange,” stated the amended regulations.

NSE says it would abide by Sebi norms, there might be a case for reconsidering some of the clauses. “Some people are even advocating dual- listing. The market can get fragmented in the case of dual- listing and liquidity will get impacted, as dual trading can divide the investors,” said the source.

NSE sources said, after listing, an organisation becomes profit seeking because investors would want better returns. “ We have sought in- principle approval from Sebi to restructure our organisation and separate the profit- seeking role from the regulatory one,” said a source.

NSE says self- listing is a common practice internationally and there could be fresh demarcation of the exchange’s regulatory functions. “ If you look at the global benchmarks, virtually every exchange that has gone down the path of listing has chosen self- listing. Therefore, to go ahead and not list on the NSE is not a good solution,” Ravi Narain, vice- chairman of NSE, told Business Standard recently. For instance, to ensure integrity of trading, the Australian Securities Exchange ( ASX) entered into an agreement with Australian Securities and Investment Commission ( ASIC), whereby the latter monitors and supervises ASX’s compliance as a listed entity and exercises all powers regarding the admission or removal of ASX from the official list, and the granting, stopping or suspending of the quotation of ASX’s securities, in a manner similar to what ASX would do with other listed entities.

The Singapore and the Hong Kong stock exchanges have also constituted committees to deal with conflicts of interest arising from the exchange’s regulatory, risk management and commercial functions.

“Like Singapore and Hong Kong, the issues arising from listing conflicts can be entrusted to a third entity, not necessarily the market regulator, which is vested with the responsibility to closely examine their activities as a listed entity and rule out the chances of abuse in conflict of interest situations,” the sources said.

The Hong Kong stock exchange spun off its regulatory arm with demutualisation and the New York Stock Exchange had taken similar steps as part of its corporate governance overhaul, and announced that it would further separate its regulatory arm as part of the merger of Archipelago and the subsequent public listing. “ The separation mitigates all incentives and conflicts that are related to the regulatory intensity in general, the regulation of stockholders, of competitors, of oneself, and of affiliates and also precludes possible hidden cross subsidisation, etc,” the NSE sources added.

CROSS-LISTING: CONDITIONS APPLY

• NSE fine with listing on BSE if disclosure of information goes to the regulator or any other neutral body
• Exchange will be comfortable if regulated or supervised by a competent regulatory authority, rather than another exchange
• Market regulator not keen on allowing any exchanges to cross- list
• Self- listing a common practice abroad where there is fresh demarcation of regulatory functions between regulators and self- listed exchanges
• The Singapore and the Hong Kong stock exchanges have constituted conflict committees to deal with the conflicts of interest arising from the exchange’s regulatory, risk management and commercial functions

Business Standard, New Delhi, 16th February 2016