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Dec 02, 2015

India’s securities regulator clears way for stock exchanges to launch IPOs

NSE and BSE can list their own shares under new rules issued following investor requests

India’s securities regulator will allow stock exchanges such as the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE) to list their own shares, giving them the green light to hold IPOs.

At its latest board meeting, the Securities and Exchange Board of India (SEBI) set out a series of criteria for exchanges to list their own shares, clarifying confusion over whether or how exchanges could hold IPOs and meeting long-standing demands from the exchanges.

Under the rules, trading members, associates and agents are not allowed to hold a stake of more than 49 percent in a listed exchange; shareholding thresholds of 2 percent, 5 percent and 15 percent must be monitored by depositories; and each shareholder at the time of an IPO must declare itself ‘fit and proper’, which means not having a criminal record and being in good financial shape.

The announcement comes days after a group of 17 overseas investors including Goldman Sachs, Temasek, SAIF Partners, Morgan Stanley, Tiger Global Management, Singapore Exchange and Deutsche Börse wrote to India’s finance ministry to ask that it clear the way for the NSE and BSE IPOs.

‘In the evolutionary process of any stock exchange, ‘listing’ is the next logical step after demutualization,’ writes the group, which holds a combined 31 percent stake in the NSE and a 25 percent stake in the BSE.

‘We welcome the SEBI move,’ a BSE spokesperson told India’s Business Standard, adding that listing is expected to bring greater transparency to the workings of the exchanges.