February 28, 2017 / 10:07 IST
SEBI has managed to put some minimal regulations on algo trading, said the outgoing market regulator chief UK Sinha. "I was hoping that at least one Real Estate Investment Trust, Infrastructure Investment Trust and municipal bond would list during my tenure. However, I am sure that in less than two months, there will be listings in these segments," he said.Listing his proud moments of last 6 years, Sinha said than more than 200 companies have been listed on SME platform and 345 companies have been de-listed. Sinha will hand over the office to Ajay Tyagi on March 1.
Here is the interview transcript. Q: High frequency trading has been a tricky issue for bourses across the globe. We were hoping to see some regulations on this front during your tenure.A: India is one of the very few countries which has some mechanism for controlling high frequency trading (algo trading). International Organization of Securities Commissions (IOSCO) has been debating it for almost for 5 years. Some exchanges have come out with discussion papers but none of them have been able to come out with any final regulations. Why? Because this is a very difficult area. SEBI has been able to somehow put in place some minimal regulations on algo trading. We have for example provided for a penalty on frequent cancellation of trades. We are reviewing whether that penalty should be enhanced further.We have also taken a number of measures to ensure for example the type of incidence that have happened outside India and once or twice in India as well, they are not repeated by putting checks on the size of the order you can put and in what manner you can put. Now the difficulty in this debate is that this is a highly technical area. The difficulty also is that the people who comment about this are also people who have a conflict of interest. They are either the technology providers or they are themselves using it. I don’t blame them because they have put in lot of money and effort in this.
Q: National Stock Exchange’s co-location issue has not been resolved yet. And market sources say that SEBI does not have solid evidence and hence they are delaying a decision?A: I would like to assure you that a very involved and highly qualified expert technical team which is not part of Sebi is looking at the trading data to find out what are the possible ways in which this matter can be solved. The particular nature of the use and misuse of this, I am sure once that analysis is complete SEBI will be able to take a call.We have directed the NSE to do a few things. Some of those have been implemented and some are pending.
Q: In last six years, what do you count among your major achievements? A: More than 200 companies have listed on the Small and Medium Enterprise platform; it is a proud moment for us. Nineteen regional exchanges exited in my tenure, I am not sure if that is an achievement. We have seen resistance while giving an exit route to regional exchanges. However, there was less of genuine trades and more of manipulations happening on these exchanges. We have delisted 345 companies.
Q: You are leaving from SEBI after working six years. Do you regret something you were keen on, but did not happen in your tenure?A: I was hoping that at least one Real Estate Investment Trust, Infrastructure Investment Trust and municipal bond would list during my tenure. However, I am sure that in less than two months, there will be listings in these segments.
Q: We are hearing that, you are likely to join Nitish Kumar as an economic advisor? A: I have not decided anything yet. I am shifting to Delhi since my family is staying there. So, I will relax for the first few months, read Ghalib and have a nice time.
Q: You are the only regulator probably to have worked with three finance ministers. How has your experience been? Your greatest learning because you are a statutory body and at the same time you are responsibility to the Parliament and the government? A: Yes, it has been great journey. Both the governments helped SEBI a lot. Let us take example of minimum public shareholding norms. Government had this rule since 2006 government companies should have at least 10 percent public shareholding. So, our first success was in convincing government that you please come to 10 percent. You have a rule of 10 percent and you are violating that. Let me tell you an example, when we were insisting on this and Prime Minister Manmohan Singh was very keen. The deadline for increasing public shareholding to 25 percent was last August. There was one company from Tamil Naidu which was non-compliant because of a technical issue. The then Chief Minister of Tamil Nadu wrote a very strong letter to Prime Minister that how can you force it, it is against the Tamil pride and things like that. So, it became a political issue but SEBI insisted that it has to be done and the government too agreed with our view. The government has helped us in cracking down on collective investment schemes.
Q: How comfortable are you with the listing rules of stock exchanges?A: I would say that in a relative manner compared to other parts of the world the exchanges in India are reasonably accustomed to following this rule. They are not at the highest levels but they are reasonably good in doing their duty in this regard and we nudge them. We have a mechanism of weekly review meeting. Whatever has happened during the week is discussed. So, I would say that a commercial organisation has its own conflict in regulating its entities. However SEBI, especially our integrated surveillance team and the exchanges together we have been able to avoid any mishap, that is something I am quite satisfied with.
Q: You pushed hard for listing norms for start-ups, but no company came forward. Do you see that as a failure on SEBI’s part?A: Listing of start-ups has not happened not because of anything pending with the government or with SEBI or with other regulators. This is because the whole start-up environment has changed in the last two years. When we came out with these regulations, the Flipkarts of the world were thinking of listing on the NYSE or in Singapore. So, we came out with regulations so that the companies could list here itself. But as you see, the whole ecosystem has changed since. The business models of most start-ups are facing a serious challenge because there are too many of them doing the same thing. As a result, we are seeing valuations being marked, companies, shutting down or being acquired. In such an environment, companies are not keen to list. It will take some time for sentiment to improve. So, I am not sorry about that because this is not because of SEBI or because of any other regulator. I was very hopeful that I would see at least one startup.
