A stand-off on the listing of stock exchanges is dragging on.
The National Stock Exchange of India Ltd (NSE) has indicated that it is not comfortable listing on a rival exchange, while the regulator has maintained that it will not allow exchanges to list on their own platforms.
“The key issue that remains is that of securing approval for self-listing in the sense that given NSE’s superior liquidity, efficiency in price discovery and the potential to be included in NSE’s flagship indices and the downstream products, not to do so will be highly inappropriate and unfair to the investor community,” Ravi Narain, vice-chairman of NSE, said in an emailed response to queries from Mint.
He added that NSE was comfortable with allowing its securities to trade on other exchanges after a self-listing.
“If you look at the global benchmarks, virtually every exchange that has gone down the path to list has chosen self-listing. Therefore, to go ahead and not list on NSE is not a good solution,” said Narain.
The stance of NSE is in direct conflict with the policy outlined by capital market regulator Securities and Exchange Board of India (Sebi).
On 1 January, Sebi issued a notification regarding the amendments to the Stock Exchanges and Clearing Corporations regulations to make it easier for exchanges to list. In these guidelines, Sebi clearly said self-listing wouldn’t be permitted.
“…a recognised stock exchange may apply for listing of its securities on any recognised stock exchange, other than itself and its associated stock exchange,” according to the amended regulations.
Since then, concerns have been raised about the issues that may arise when an exchange lists on a rival exchange. For instance, a rival exchange may seek disclosures that reveal trade secrets.
To address this, the capital markets regulator is willing to consider a middle path.
Sebi may allow exchanges to make disclosures directly to the regulator instead of making them to the platform on which they are listing, said two people familiar with the regulator’s thinking.
They declined to be identified on grounds that the discussions are confidential.
“There is submission that the disclosures, instead of going to the rival exchange on which the exchange is getting listed, could be given to the regulator. This suggestion is being considered by the regulator,” said one of two persons.
The second person said the regulator was open to addressing apprehensions of various stakeholders on the issue of cross-listing.
An email sent to Sebi on Wednesday remained unanswered.
NSE shareholders claim the exchange is using the issue of a self-listing to delay the process of going public.
“For the investors there are no concerns regarding disclosures that will have to be made on another exchange post-listing. And the NSE management too has not been able to explain to the shareholders about which sensitive information they are concerned about,” said Sohil Chand, managing director at Norwest Venture Partners, an investor in NSE.
Chand added that since the regulator has made its position clear, NSE must “work within the framework”.
NSE refutes the allegation that it was deliberately delaying the listing.
“There is a view emerging in certain quarters that the NSE is not keen to list. That viewpoint is misplaced. It has been clearly articulated by the management recently that the board has taken a view to go ahead with listing,” said Narain.
In contrast with the position taken by NSE, rival BSE Ltd, Asia’s oldest stock exchange, says that it is comfortable listing on its younger rival.
Routing disclosures via the regulator may only delay dissemination of information, it says.
“BSE plans to list itself on NSE after necessary approvals. BSE has no objection in providing compliance-related details on timely basis to NSE, since disclosures on a timely basis would ensure that the same are also disseminated to the investors immediately for taking informed decisions,” a BSE spokesperson said in an emailed response to queries from Mint.
“Information passing through multiple layers could delay such dissemination,” said the spokesperson.
Experts say that disclosures made to rival exchanges should not be a concern.
“The disclosures are meant for the investors and not for the consumption of a rival exchange on which the exchange is proposing to list,” said Sandeep Parekh, founder of legal firm Finsec Law Advisors.
“The disclosures are to ensure transparency for the investors as prescribed in the listing regulations. An exchange cannot ask for information that is not pertinent to the investors,” he said.
“In theory also, the leakage of trade-related information is not a valid reason. The regulator will play a key role as the listing regulations are under Sebi’s purview and no longer a listing agreement between the exchange willing to list and the exchange on which it will list,” added Parekh.