View Full Version : Govt mulls FDI in stock exchanges

santosh tiwari
22 Sep 06,, 03:49
NEW DELHI, SEPTEMBER 21: The government said it will make it clear within 10 days whether foreign players be allowed to hold stake in stock exchanges or not.

The policy on allowing FDI in bourses will be firmed up in a week to 10 days time, Finance Ministry sources said.

The policy would make it clear if bourses can invite foreign direct investment while divesting brokers equity in them below 49 per cent, in line with SEBI guidelines on demutualisation.

Nasdaq has reportedly expressed its keenness to pick up stake in Bombay Stock Exchange.

The Finance Ministry officials already have two rounds of discussion with RBI Governor Y V Reddy and others.

Another round of discussion will be with SEBI Chairman M Damodaran in 2-3 days, they said.

The need for FDI policy on stock exchanges were not felt earlier since most of them were not companies but associations of persons and not demutualised, which meant that traders held equity in these bourses.

But since, the government has made it mandatory for all the bourses to corporatise and demutualise, the policy becomes inevitable, the sources said.

While the Finance Ministry will give inputs, the Commerce Ministry will frame the FDI policy, they said.

While the FDI policy will be framed by the Union government, the market regulator SEBI would issue regulations on mechanism of demutualisation, which basically means that trading activity and the management should be controlled by separate entities.

Many stock exchanges like BSE are awaiting the FDI policy and regulations on demutualisation from SEBI.

BSE had reportedly made it clear that 26 per cent of the stake would be sold to strategic investors and the remaining 25 per cent through an IPO.

Over a month back Nasdaq official met their counterparts in BSE, giving rise to speculation that the technical exchange would pick up a stake in it.

BSE has appointed Kotak Mahindra Capital Company as its financial adviser for the demutualisation process.

However, BSE MD and CEO Rajnikant Patel time and again refused to specify whether Nasdaq has expressed interest in buying a stake in BSE.

He had also said IPO is linked to demutualisation regulations, which are yet to be finalised.

May, 2007 is the deadline for BSE to bring down brokers stake in it to 49 per cent.