The Securities and Exchange Board of India’s (Sebi) decision to put in place an independent committee at MCX Stock Exchange (MCX-SX) to oversee all financial transactions and major policy decisions is an attempt to prevent any kind of spillover impact of the NSEL crisis on entities under its regulatory purview.
Experts say this is the first time Sebi has directed a stock exchange to constitute such a committee that will effectively be managing the day-to-day operations of the bourse. It is believed that MCX-SX will put in place the committee by Monday.
Persons privy to the regulatory framework say Sebi has laid down guidelines for stock exchanges to constitute oversight committees for functions like managing membership, trading processes and listing, but it has never before asked for a committee to handle the finances of an exchange.
As per Wednesday’s directive, this committee will advise the board on matters including all financial transactions related to investment, lending/borrowing of funds, related party transactions, along with appointment of key management personnel and major capital expenditures.
“In December 2012, Sebi came out with a circular on forming oversight committees for various functions of the exchange. That was after the Bimal Jalan committee broadly recommended that stock exchanges should have such sub-groups,” said a person familiar. “In the case of MCX-SX, Sebi has gone beyond what is already stated in the guidelines.”
Market participants say the move has been necessitated as NSEL — another exchange belonging to Jignesh Shah Group — is in the midst of a settlement crisis and Sebi would not want money to move between MCX-SX and NSEL.