India's markets regulator is planning more reforms to woo foreign investors, including speeding up registration, reducing the cost of trading in the cash equities market and making it easier to short-sell, its chief said on Wednesday.
Chairman Tuhin Kanta Pandey took over as head of the Securities and Exchange Board of India in March, and has moved quickly to make regulations more friendly to foreign investors, domestic funds and corporations, loosening tighter rules implemented in the years before he took charge.
The moves come in a year when foreign investors have pulled out nearly $17 billion from Indian equities and the economy faces pressure from high tariffs imposed by the US on India's exports.
"In my interactions with foreign participants, both in India and abroad, I got the feeling that the number one (issue) is that our registration process still takes too long. It is unacceptable," Pandey said.
"Our objective is to make it into a few days, not even a month."
DEEPENING CASH MARKETS
SEBI is also reviewing a swathe of regulations including ways to make India's cash equity markets more liquid and will review margins needed for such trading.
"While the liquidity in cash markets has improved in the last few years we want it to improve further," Pandey said. "Some decisions may have to be taken in terms of margins," he said, declining to share further details.
India's securities markets have diverged from global peers with the size of the derivatives market more than 300 times that of the cash market.
Speculation in futures and options, including from retail investors, has grown and SEBI has been trying to rein in the market.
SEBI is also not closed to the idea of 'product suitability' rules, he said. Such measures would make it more difficult for small investors to engage in risky derivatives trades.
While the market regulator continues to evaluate further measures needed to cool the derivatives market, Pandey said it first needed to assess the impact of the rule changes it had already announced.
"We have highlighted the problem that there is irrational exuberance of some of the players, whom we consider not really adequately informed about the risks in the market," Pandey said.
"We will first have to look at the measures already in place ... We need a certain stability of approach in the way we assess this problem," he said.
Details of proposals under review have not been previously reported.
BOOSTING SHORT-SELLING
SEBI is also reviewing rules for short-selling and the mechanism for borrowing and lending securities, Pandey said, adding that those markets remained shallow.
"We have to look at costs. If the transaction cost is too high the activity will not take place," he said.
SEBI is also discussing the possibility of "netting", which allows investors to net off buy and sell trades, reducing the amount of capital that investors, particularly foreign investors, need to fund their trading operations.
India's central bank does not currently allow such netting.
"Perhaps netting in the same scrip may not be possible but in different scrips is possible. If we do that, that will be a big facilitative step," Pandey said.
The regulator, responding to concerns raised by foreign investors, has also decided to defer its plans to move towards T+0 or same-day settlement from the current T+1 settlement system.
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