Explained: What is Social Stock Exchange to be set up by BSE after SEBI approval?

Bombay Stock exchange (BSE) today said in a regulatory filing that it has received in-principle approval from the capital market regulator Securities and Exchange Board of India (SEBI) for setting up the Social Stock Exchange as a separate segment.

“...SEBI has granted its in-principle approval to BSE for introducing SSE as a separate segment on BSE," it said. It may be recalled that the SEBI had notified rules for the Social Stock Exchange (SSE) in July this year to provide an impetus to social enterprises with an additional avenue to raise funds.

SEBI later released a detailed framework for the Social Stock Exchange in which it specified minimum requirements for a Not-for-Profit Organisation (NPO) for registering with the exchange.

What is Social Stock Exchange or SSE?

SSE is a bourse meant to serve the private and non-profit sectors and will help them in raising funds through the exchange. The idea of SSE was first floated by Finance Minister Nirmala Sitharaman in her 2019-20 Budget speech. Many countries like the UK, Canada and Brazil already have SSEs.

Social enterprises eligible to participate in the SSE will be Not-for-Profit organisations (NPOs) and for-profit social enterprises. According to the SEBI's rules, the SSE will be a separate segment of the stock exchanges.

The SSE will allow non-profit or non-government organisations to list on the stock exchanges to raise funds. 

According to the rules, corporate foundations, political, religious organisations, professional or trade associations, infrastructure and housing companies will not be eligible for listing on the SSEs. However, the affordable housing segment will be eligible for the same. 

According to an earlier draft SEBI report, the SSE may help in rebuilding the livelihoods of people who may have been affected by calamities or pandemics like COVID-19.

According to reports, India has more than 31 lakh Non-Profit Organisations.