Mumbai: Market regulator SEBI Thursday announced exhaustive instructions related to ownership and governance for stock exchanges and clearing corporations, a move aimed to promote their effective and transparent functioning.
Stock exchanges and clearing corporations are now required to submit background and related information to establish that their shareholders/promoters are "fit and proper persons", among others.
Entities seeking recognition to operate as a bourse or clearing corporation need to submit various information, including business feasibility plan for the next five years, financial statements and bank account details, to SEBI.
A key element in execution of orders on exchanges, clearing corporations work with bourses to handle confirmation, delivery and settlement of transactions.
In a circular, market regulator SEBI said the applicant should provide satisfactory information regarding appointment of heads of key departments such as legal, listing, member registration, trading and surveillance in case of a stock exchange.
Once the recognition is granted, stock exchanges can commence operations with a minimum of 50 trading members while there should be at least 25 clearing members to start a clearing corporation.
Those exchanges and clearing corporation having a networth of less than Rs 100 crore and Rs 300 crore, respectively, at the time of commencement, have to submit plans -- within 90 days -- for achieving minimum threshold networth levels. These plans have to be approved by respective shareholders.
Outlining instructions for executive compensation at stock exchanges and clearing corporations, SEBI said variable pay component would not exceed one-third of total amount and 50 percent of the variable pay would be paid on a deferred basis after three years.
As per SEBI, ESOPs (Employees Stock Options Plan) and other equity linked instruments would not form part of the compensation for the key management personnel.
Before giving compensation, entities are required to consider their financial conditions such as net profit and revenues.
Regarding ownership in stock exchanges and clearing corporations, SEBI said that in case a shareholder wants to increase the shareholding to over two to five percent, the entity has to furnish various details including name and address.
Further, entities have to provide SEBI with details of action penalties, if any, imposed by any statutory authority in India or abroad, besides information regarding pending before any court or tribunal.
"Stock exchange/clearing corporation shall put in place a monitoring mechanism to ensure compliance with shareholding restrictions...," the circular said.
They also need to disseminate on their website, the number of shares available in the non-public, FII and FDI category.
Stock exchanges and clearing corporations are also required to report to SEBI, if there is any breach of shareholding limits within seven days of such a development.
Also, their governing boards would have to include shareholder directors, Public Interest Directors (PIDs) and a managing director while chairman would have to be elected from among PIDs.
The managing director would be selected in an open manner by making public advertisements for the post.
PIDs would not be simultaneously on the board of any other stock exchange/clearing corporation or their subsidiary, the circular said.