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‘SEBI moots new ownership framework for setting up market infrastructure institutions’

  • Category
    Economy
  • Published
    25th Jan, 2021

In a latest move, SEBI proposed a new framework for ownership of Market Infrastructure Institutions (MIIs) to facilitate new entrants to set up stock exchanges and depositories.

Context

In a latest move, SEBI proposed a new framework for ownership of Market Infrastructure Institutions (MIIs) to facilitate new entrants to set up stock exchanges and depositories.

About

What are MIIs?

  • Intermediaries / Market Infrastructure Institutions:
    • Recognised Intermediaries
    • Processing Application Status
    • Stock Exchanges
    • Application Formats and Fees
    • Clearing Corporations
    • Depositories
    • Entities Permitted to Send Stock Tips using Bulk SMS
  • These institutions are systemically important institutions whose failure could lead to "bigger cataclysmic collapses" bringing down the economy.

Key-highlights of the Suggestions

  • Liberalised framework: The regulator has suggested a liberalised framework in the landscape of MIIs (Market Infrastructure Institutions) by allowing higher shareholding at the inception stage and prescribing a dilution in the ownership over a period of time.
    • The regulator said there is a need to incentivise fintech players through suitable relaxations in the ownership framework to enter the Indian MII space.
  • Public Limited Company: MII should also be a public limited company.
  • Tenure (MD & CEO): New norms pertaining to tenure of MD and CEO of MIIs, stock exchanges, depositories and clearing corporations have also been proposed.
  • Statutory committees: Besides, Sebi has recommended a more diversified composition of statutory committees at MIIs to boost corporate governance norms.
  • Shareholding: It has been proposed that promoters -- resident individuals, domestic institutions (resident owned and controlled) -- setting up the MII may, directly or indirectly, either individually or together with persons acting in concert, can hold up to 100 per cent shareholding.
    • In case of foreign entities, such limit has been proposed up to 49 per cent.
    • The shareholding of such resident individuals and domestic institutions should be brought down to not more than 51 per cent or 26 per cent in 10 years from the date of commencement of business.
    • In the case of foreign entities, their shareholdings should be reduced to 26 per cent or 15 per cent during the period.

Present framework

  • The present framework caps the ownership of MIIs at a lower shareholding limit, which is not more than 5 percent for individuals and institutions (domestic or foreign) in general and permits only up to 15 percent ownership stake by select category of institutions.
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