SEBI may approve interoperability of capital market in Sept 18 board meet

The Securities and Exchange Board of India (SEBI) would push major reforms in its board meeting on September 18. The SEBI board is likely to approve interoperability of capital markets, review the fair market conduct report, the listing obligation and disclosure regulation, along with reviewing the enforcement and settlement mechanism committee findings.

The introduction of interoperability would allow trading companies to clear trades through a firm of their choice, rather than the current arrangement of necessarily going through the clearing house owned by the exchange on which the trade was executed.

The regulator had formed a committee for interoperability in 2013, under the chairmanship of KV Kamath and submitted a report in 2015.

In the report, the committee recommended, "At this juncture, maintaining separate clearing corporations for each exchange would be prudent. However, SEBI may keep the interoperability option open and consider the proposal for implementation when ground conditions are met, which, inter alia, include clear intent of the participants coming together and having a suitable framework in place to the satisfaction of SEBI."

The board is likely to deliberate on the fair market conduct committee report after further discussion. Fair market committee has recommended that trading done by any entity in excess of verifiable financial sources, should be deemed fraudulent, if it leads to any manipulation in the price or volume of the security.

This may give power to the regulator to intercept phone calls for better investigation while strengthening regulations to act against perpetrators of financial fraud. Currently, SEBI is empowered to seek call data records (CDR) as part of an investigation.

The committee has issued a strong view on unpublished price sensitive information (UPSI). "The committee has recommended that listed companies should initiate inquiries into any case of leak of UPSI or suspected leak of UPSI and inform SEBI promptly," it said in a report.

As per the consultation paper on disclosure of listing obligation and disclosure requirement, any delay or expected delay in payment of interest or dividend in accordance to due date has to be disclosed within 24 hours.

The SEBI-appointed committee had earlier submitted a report on enforcement and settlement process recommendations, which may also be tabled in the board meeting. The committee has recommended that proceedings relating to insider trading, front running and misstatements in the IPO documents may be settled "depending on the facts and circumstances of each case".

It also proposed a confidentiality clause in the settlement mechanism, wherein identity of the applicant will not be disclosed to garner information of defaults as well as possible violations from defaulters in the securities.