Financial Daily from THE HINDU group of publications
Thursday, Dec 26, 2002
Financial Daily from THE HINDU group of publications Thursday, Dec 26, 2002 |
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Markets
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Stock Exchanges Demutualised stock exchanges — Broker-members' voting rights may be capped
Hema Ramakrishnan
NEW DELHI, Dec. 25 THE Finance Ministry and the Securities and Exchange Board of India will shortly work out a proposal to cap the voting rights of stockbroker members in the demutualised stock exchanges. According to senior Government officials, although SEBI and the Government have accepted the recommendation of the Kania Committee to have stockbrokers also as stakeholders, both the regulator and the Government want to impose a ceiling on the voting rights of this class of shareholders. The committee had suggested that within a timeframe of three to five years, at least 51 per cent of the shares of the demutualised exchange would be held by non-trading members of the exchange. It had also mooted a ceiling of five per cent of the voting rights which could be exercised by a single entity, or groups of related entities, irrespective of the size of ownership of the shares. In many overseas exchanges also, there is a ceiling on the shareholding limit. In most cases, it does not exceed 10 per cent. SEBI, in consultation with the Finance Ministry, would also work out the amount of shares which would accrue to the stock brokers in lieu of the value of their cards, once the existing exchanges are corporatised and demutualised. This is expected to be done after a valuation exercise is done of the assets and liabilities of the exchanges. In a demutualised exchange, there is a separation of ownership, management and trading rights, to avoid conflicts of interest. The Kania Committee on Corporatisation and Demutualisation which was formed by SEBI had recommended that exchanges could adopt either the card or deposit system. If the deposit system were accepted, the value of the card would be segregated into two independent rights. One would be the right to share in the net assets and goodwill of the exchange and the right to trade on the stock exchange.
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