India needs more independent equity clearing corporations with a diverse ownership as being fully owned by stock exchanges raises a conflict of interest, an official from the country's markets regulator said on Thursday.
"Some form of demerger of clearing corporations from their parent exchanges may be the way forward. We will come out with a public consultation on this shortly," Ananth Narayan, a whole-time member of the Securities and Exchange Board of India (SEBI), said at an event in Mumbai.
In June, SEBI set up a committee to review the ownership structure of clearing corporations to ensure greater independence and resilience.
The committee will examine whether the list of investors allowed to hold stakes in clearing corporations can be expanded.
At present, clearing corporations of each of the major Indian exchanges is fully owned by them.
"As on date, the dominant equity clearing corporation in India is owned by the dominant exchange, clearing over 85% of all cash and derivative equity market trades, dealt by the large exchanges," Narayan said.
"In this context, 100% ownership of clearing corporations by a single exchange does raise questions of an actual or perceived conflict of interest," he said.
Separately, Narayan said SEBI will institute a process of independent evaluation of market infrastructure institutions (MIIs) starting next year, along with the regulator's own supervision.
"MIIs are not commercial entities. Competition, public shareholding, and listing can create incentive to privacy of the commercial items over the core role of MII as a public utility provider. There is a risk of compromise on compliance, risk, as MIIs complete for clients who they regulate," he added.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
